It’s a ‘mistake’ to read too deep into the oil collapse

The breakdown in the oil market terrified Wall Street, but investors shouldn’t fret about the broader market, CNBC’s Jim Cramer said Tuesday.

After two straight weeks of positive weekly gains, the three major indexes have turned in negative trading sessions two days in a row.

The “Mad Money” host said stocks were due for a pullback this week, adding, “I think it’s a mistake to read too much negativity into this stuff.”

The Dow Jones, S&P 500 and Nasdaq Composite all fell about 3% during the trading day. The three averages are down about 5% over the past two days.

Crude prices for May contracts fell into negative territory for the first time in history amid a global glut of oil. The coronavirus outbreak has wiped out the consumer and travel economies, leading to very little demand for oil. The situation has been further troubled by the scarcity of available storage.

“The oil collapse isn’t the end of the world, but man, this market got ahead of itself after that $2.2 trillion [stimulus package], and now we’re rolling back some of those gains,” Cramer said.

Cramer argued the market was due for a pullback. Since quickly falling into a deep bear market from their all-time highs in February, the major indexes have attempted to pare back their losses.

As of Tuesday’s close, the S&P 500 and Nasdaq are both up 25% from their lowest points in March. The Dow has risen 26% from its March bottom.

Investors ought not to take their cue from the oil market because that market has been “insane,” Cramer said.

“The oil futures contracts that were due to settle today collapsed after some rookies who didn’t know what they were doing got fleeced,” he said. “All the traditional storage areas for crude … [are] pretty much full, and the rookies didn’t know that. More importantly, though, the oil producers are totally disconnected from reality” because they are “pumping way too much supply.”