Jim Cramer unpacks Tuesday's market action as winning stocks take a breather

• CNBC's Jim Cramer analyzed Tuesday's market action and told investors to step back as big winners cool down after huge runs.
• “I say let the rotation play out. Give it some space,” he said. “The stocks that are rallying have been down for days, maybe weeks, maybe even some cases, months.”

CNBC's Jim Cramer analyzed Tuesday's market action and told investors to step back as big winners — more speculative stocks and those related to the data center — cool down after huge runs.

“I say let the rotation play out. Give it some space,” he said. “The stocks that are rallying have been down for days, maybe weeks, maybe even some cases, months.”

Tuesday saw the S&P 500 eke out another record close, settling up 0.06%, while the Dow Jones Industrial Average gained 0.40% and the tech-heavy Nasdaq Composite dipped 0.39%.

These stock moves reflect fears that the economy is slowing down, Cramer said. Some on Wall Street are buying up companies that typically do well in a recession “and ringing the register on everything else,” he continued. Cramer pointed to gains in names like consumer staples PepsiCo and Procter & Gamble, as well as pharmaceutical giants Johnson & Johnson and Merck.

He explained that traders are instead focused on lower short-term interest rates they fear are indicative of a recession. Cramer also pushed back against the notion that the data center bull market is waning.

To Cramer, Tuesday's session was “a moment where the winners had to cool off and the losers had to play catch up.” A number of more speculative stocks had seen “parabolic moves,” Cramer said, and the market needed to take a breather. He noted that popular names like Palantir, AppLovin, Robinhood and Coinbase declined on Tuesday.

“I know it's hard, with so many people saying that this is the beginning of the big correction, to point out that plenty of stocks are actually doing quite well and are just playing catch-up. But that's all they're doing,” he said. “The market hasn't changed stripes…it's just wearing a different style for a few days while it waits for the dry cleaning to come back.”