Cramer explains why Thursday's sell-off is happening

Published Thu, Jul 8 20217:44 AM EDTUpdated Thu, Jul 8 202110:52 AM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

CNBC's Jim Cramer weighed in on Thursday's sharp pullback in U.S. equity futures, citing a number of factors from Japan announcing a state of emergency for Tokyo ahead of the Olympics due to Covid and sharp drops in cryptocurrencies. At the time of Cramer's remarks, shortly after 7 a.m. in New York, Dow futures were down around 450 points . Futures for the S & P 500 and Nasdaq were also more than 1% lower. All three stock benchmarks were down more than 1% shortly after Thursday's open on Wall Street. "There's a lot of negatives surfacing in an environment where there's so much speculation and there's so much supply, so it's not a horrible time, but it's obviously a time where people are reassessing," Cramer said on "Squawk Box." Japan's public health directive for Tokyo is set to go into effect this coming Monday and last through the Summer Olympics. All spectators are reportedly set to be banned . Cramer said the Tokyo order "makes you feel like, 'Wait a second. Are we back in that world so travel goes down?'" The "Mad Money" host also pointed to bitcoin , which was down more than 6% Thursday morning to below $32,500. The world's largest cryptocurrency by market value has been under duress since reaching an all-time high near $65,000 in mid-April. Bitcoin's decline "freaks out people, too," Cramer said. "I think that's China. ... China doesn't want bitcoin anymore." Another factor for the market, Cramer contended, is the level speculation that's surrounding the so-called meme stocks. While GameStop , AMC Entertainment and a few other names captured the most attention since late January when the Reddit trading frenzy began in earnest, Cramer said it's now really spreading to more obscure names. "We have to be careful of these guys. This is no longer just a couple of guys having some fun," Cramer said. "I do think this is a moment where the speculators have just overreached," he added. "If you watch, if AMC and GameStop go down, you're going to see a lot of that $23 billion that came into the market in June leave." AMC shares were down more than 8% in premarket trading, one day after closing down 9.79% at $45.07 apiece. Shares of GameStop were down more than 5% in the premarket, building off its 4.46% dip on Wednesday. Both stocks opened lower Thursday. AMC is up nearly 2,000% for the year. GameStop has risen close to 900% in 2021. "I would tell you that we just continue to see lots of stocks go up, brutally up, because the memesters have broadened out beyond GameStop and AMC because they understand that Gary Gensler, the SEC chairman, is completely overwhelmed." The SEC did not immediately respond to CNBC's request for comment. The move in futures Thursday follows the S & P 500 and Nasdaq closing at record highs Wednesday and the Dow Jones Industrial Average ending just short of a record close. It also comes as the 10-year U.S. Treasury yield falls further, reaching 1.25% at one point in the morning . Cramer said he believes some market participants are beginning to question the economic recovery from the coronavirus pandemic . "I think people are worried that things have cooled. I call it the good-as-it-gets phenomena," he said, noting that various Wall Street analysts have downgraded mining, steel and chemical companies. The highly transmissible delta variant, which has now become the dominant coronavirus strain in the U.S. , is another consideration for the market, Cramer said. "To say that the delta variant has made it so that we're, let's say with the people who are not vaccinated, having a problem, I think that's just true." Disclosure: CNBC parent NBCUniversal owns NBC Sports and NBC Olympics. NBC Olympics is the U.S. broadcast rights holder to all Summer and Winter Games through 2032.

Jim Cramer

Scott Mlyn | CNBC

At the time of Cramer's remarks, shortly after 7 a.m. in New York, Dow futures were down around 450 points. Futures for the S&P 500 and Nasdaq were also more than 1% lower. All three stock benchmarks were down more than 1% shortly after Thursday's open on Wall Street.