CNBC's Jim Cramer on Tuesday gave an ominous outlook for Wall Street, painting what he called the "most treacherous" stage of a challenging environment.
"We are at the beginning of the most treacherous phase of this [COVID-19] bear market," the "Mad Money" host said. "The point where the strongest stocks rally like crazy and … the weakest ones they retreat right into the wilderness."
After turning in their worst trading day since the 1987 market crash, the major trading averages rebounded in Tuesday's session. The Dow Jones Industrial Average rallied about 1,049 points, or 5.2%, while both the S&P 500 and Nasdaq Composite both surged 6% as investors digested a potential $1 trillion stimulus package White House officials are trying to assemble in Washington to support the economy through the coronavirus pandemic.
The indexes, however, are still trying to recover from a bear market, where a security is down 20% or more from its recent highs. The Dow is closed 28% off its high more than a month ago, while the S&P 500 and Nasdaq are more than 25% below their Feb. 19 highs.
"The market rallied today, but the stocks that rallied are the ones that have strong enough balance sheets to survive this hiatus and come out on top because COVID is crushing their rivals," Cramer said.
Stock in the grocery, food and drug sections of the economy managed to rise, he noted, calling them "recession proof." The day prior, Cramer recommended investors look at consumer staples, or companies of products "we can't live without," to find opportunities in this stay-at-home-driven market.
General Mills popped 11.78% to a new 52-week high. Conagra Brands and J M Smucker Co both surged about 9%, while Clorox spiked more than 13% during the trading day. Among the drug stocks the host has recommended, Merck and GlaxoSmithKline both rose about 7%.
Investors paid up 7% for Amazon, which benefits from an environment where consumers are staying at home, and 11% for Walmart, who could benefit from the Trump administration's support to provide direct payments to Americans, Cramer said.
"At these levels, I actually think you need to wait for another pullback before you buy some of these," he said.
Cramer did suggest that utility stocks, which can outperform the market in a slowing economy, are buyable at these levels. He has recommended Dominion Energy and American Electric Power among his top choices.
Travel, leisure and airline stocks, however, continued to feel more pain during the session as investors try to account for the impact of the fast-spreading virus on those industries.
"[W]e're finally moving in the right direction, but I think we need to overcome more looming bad news about the virus, and about bankruptcies, before the whole indexes can bottom," though many stocks have already put in their bottoms, Cramer said.
Disclosure: Cramer's charitable trust owns shares of Amazon and Clorox.