Jim Cramer says flood of IPOs is weighing on inventory costs
Investors can expect stocks to remain under pressure as long as the market is flooded with new public offerings, CNBC’s Jim Cramer said Thursday.
“A lot of stocks are being hit here because there isn’t enough cash to buy all of the junk that has been created lately,” said the Mad Money host. “Inventories are falling because, just like the goods in a store, the inventory is simply too large and therefore devalued.
As the second half of 2021 draws to a close, Wall Street is digesting a long list of IPOs that occurred in the first six months of the year. In the first half of the year, more than 210 IPOs grossed more than $ 70 billion. June was the single month with the highest turnover for the IPO business for almost 21 years.
The IPO market practically separated the bond market, typically a predictor of the overall economy, from the stock market, Cramer said. If the IPO flood continues, stocks will continue to decline under their own weight, he said.
“If we get some respite from new underwriting and the earnings are still good, I’ll stay a cop, but you have to stop the new offering,” said Cramer. “Stocks go down because people have to sell. They don’t want to lose money.”
The Dow Jones Industrial Average rose nearly 54 points, or 0.15%, to close at 34,987.02 on Thursday.
The S&P 500 lost 0.3% while the Nasdaq Composite fell for the third straight year.
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CNBC’s Bob Pisani contributed to this report.