U.S. stocks logged another decline in choppy trading Wednesday. The Dow Jones Industrial Average slipped 33.45 points, or 0.26 percent, to close at 12,598.55. It has closed lower 10 times out of the past 11 sessions. Meanwhile, the S&P 500 fell 5.86 points, or 0.44 percent, to finish at 1,324.80 while the Nasdaq declined 19.72 points, or 0.68 percent, to end at 2,874.04.
“What we fear, obviously, is the 1,000 point bruising we got from Dow 10,700 in May of 2010 through the summer of that year and the hideous 2,000 point May until October annihilation that 2011 brought us,” said Jim Cramer on CNBC’s “Mad Money.” “The worries are justified.”
It appears as though Europe is on the verge of a collapse, Cramer said, as Greeks make a modern day run at the banks because they are anxious to should Greece get booted by the euro. If that happens, Cramer thinks Spain and Italy won’t be far behind. So while there the U.S. economy may show signs of improvement, it seems Europe is what’s driving the markets today.
“So with that hideous backdrop, we have to ask who can do the most damage in the Dow from here? What stocks would take the averages down another 10 percent, the big fear out there on top of the 700 odd points we've already fallen from Dow 13,300,” Cramer said. “Who, for the purposes of this analysis, is vulnerable to a big decline?”
To start, Cramer pointed to the oil and gas companies. This group is in free fall and it won’t likely stop falling anytime soon, Cramer said. So far this year, both Exxon Mobil and Chevronare down 3 and 6 percent respectively. Last year, Chevron only sold down to $90 a share and currently trades at around $100 a share. Exxon hit $67 a share and is currently at the $82 level, so it could fall quite a bit further. Chevron pays a 3.6 percent dividend yield, but Cramer said Exxon’s 2.77 percent yield doesn’t count for much.
(RELATED: Cramer's Top Dividend Stocks)
“I think Chevron could bang us until it yields 4 percent, still a little ways from here, but Exxon, which reported a disappointing quarter, could decline another 7 or 8 percent fairly easily,” Cramer said. “Call Exxon vulnerable.”
Meanwhile, Cramer wonders if Caterpillarcould get crushed, too. Last year, its stock fell to the $70 level. Considering recent comments from Australian miner BHP Billiton suggesting a slowdown in commodity capital equipment spending, Cramer wouldn’t be surprised if Caterpillar did fall to $70 a share. Then again, he thinks its juicy dividend might help prop the stock up around the $80 level. Either way, he thinks CAT is vulnerable.
Speaking of industrials, other companies seem to be a firmer footing. United Technologies and 3M, for example, both reported excellent quarters lately. These stocks could fall, though, since they yield less than 3 percent. But Cramer thinks they strong, diversified businesses that just might tough it out. So while thy have exposure to Europe, Cramer said they also have some secular positives.
“A decline in the Dow of several percentage points wouldn't shock me from these levels, but a big collapse a la 2010 and 2011? That's hard for me to swallow without a total collapse in Europe,” Cramer said. “Unfortunately, that's not beyond the realm of possibility so we have to stay vigilant and avoid the vulnerables no matter what.”
Read on for Cramer: The Best Run U.S. Companies
Call Cramer: 1-800-743-CNBC
Questions for Cramer?
Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com