When The Bellwether Doesn't Ring: Here's Why The Auto Parts Plunge Didn't Affect Other Sectors

Wednesday was a brutal day for auto part stocks after O'Reilly Automotive Inc ORLY reported not only poor sales metrics for its second quarter but concerning commentary, including a "more challenging sales environment" than expected.

So, why is that the entire stock market didn't move lower in sympathy? After all, the auto sector is one of the most closely watched sectors as a gauge of the economy, and heavy selling in the category typically brings down the entire stock market. But this is no longer the case, CNBC's Jim Cramer explained during his "Mad Money" show Wednesday.

There is no doubt that O'Reilly's earnings report and commentary were weak, but the 19-percent plunge in the stock is par for the course for any retail weakness — auto sector or not — Cramer explained.

Here is a summary of how auto parts stocks closed out Wednesday:

• O'Reilly Automotive: $178.77, down 18.89 percent.
• Advance Auto Parts, Inc. AAP: $105.21, down 11.15 percent.
• AutoZone, Inc. AZO: $516.83, down 9.6 percent.
• U.S. Auto Parts Network, Inc. PRTS: $3.17, down 5.09 percent.
• Genuine Parts Company GPC: $89.16, down 4.8 percent.

Why The Market Didn't Follow

There is a strong case to be made why the auto parts weakness didn't spread to other sectors, Cramer continued. There has been some "fundamental changes" in the U.S. economy that many people aren't acknowledging in which the market can "blossom without the traditional spurs of retail sales or autos."

Instead, the market is focusing on 10 sectors that are contributing to the market's strength, including: travel & leisure, health care, capital goods, oil & gas derivatives, the stay-at-home economy, defense, aerospace, housing, e-commerce and banks.

And what do all these sectors have in common that investors love?

"They all seem to have endless runs of better-than-expected earnings. Remember: that's what drives stocks," Cramer said. "And, crucially, these industries employ a huge number of people."

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