TheStreet.com's Jim Cramer says stocks connected to the sector will take it on the chin if the housing index falls further.

A perusal of the charts this weekend shows something surprising: The weakest group out there has been the homebuilders for several weeks now. KB Home (NYSE: KBH) (Cramer's Take), D.R. Horton (NYSE: DHI) (Cramer's Take), Lennar (NYSE: LEN) (Cramer's Take), and Toll Brothers (NYSE: TOL) (Cramer's Take) have simply been a horror show. What's going on here? How can these stocks be so dangerous when mortgage rates have crashed through 5%, the level that every banker I talk to says mortgages jump off the table and refinancings rush to be done.

What's going on? This group's tracking more than just mortgage rates. It's tracking employment and news flow and both are terrible.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Abercrombie & Fitch Inc. (NYSE: ANF) beat Q4 earnings estimates handily, sending shares higher.
• Activision Blizzard Inc. (NASDAQ: ATVI) did well in the holiday period but offered weak guidance.
• Barclays (NYSE: BCS) one-time gains offset write-downs and said it expects to resume dividend payments.
• Boeing Co. (NYSE: BA) shares fell after it announced that it had understated its Q4 and fiscal 2008 loss.
• Coca-Cola Co. (NYSE: KO) topped Q4 earnings estimates due in part to volume gain internationally.
• Diageo (NYSE: DEO) earnings rose in the first half, but it cut its full-year forecast.
• GSI Commerce Inc. (NASDAQ: GSIC) "solid" Q4 results led to an analyst downgrade.

Masco Corp. (NYSE: MAS), which manufactures and installs building materials, announced its fourth quarter numbers Wednesday afternoon, falling short of analyst estimates.

Analysts had expected to see the company show a loss for its fourth quarter of 5 cents, but a tough sales environment pushed the company's loss much wider than expected, with a reported 18-cent loss per share.

TheStreet.com's Jim Cramer says these are the stocks that you should watch.

Some stocks have just been totally given up on, as if nothing good can ever happen to them. Check out Masco (NYSE: MAS) (Cramer's Take) , for example. Masco's a great company, always has been -- a dominant supplier to the housing industry, both remodel and original. This company, which MAKES money, is selling at almost a 5% yield and no one cares.

Or how about Fortune Brands (NYSE: FO) (Cramer's Take)? It has a terrific housing component -- dominant player -- and one of the best spirits businesses. We found out from Diageo (NYSE: DEO) recently that they have a great business in spirits, and the company may be on the verge of getting Absolut, a fantastic brand. The stock trades at an amazingly low multiple. Or consider Black & Decker (NYSE: BDK) (Cramer's Take) , one the great innovators with a classically pro-shareholder bias.

These companies are making good money in the worst environment imaginable. They have decent balance sheets. When this period ends, they will be dominant players, taking share from everyone.

MOST NOTEWORTHY: Omnicare, Masco, Smart Modular and VASCO Data Security were today's noteworthy downgrades:

• Matrix downgraded shares of Omnicare (NYSE: OCR) to Hold from Buy to reflect the company's very weak performance and higher than average risk.
• Merrill Lynch downgraded Masco Corp (NYSE: MAS) to Sell from Neutral to reflect expectations for a decline in U.S. housing starts and remodeling in 2008. The broker recommends swapping into Texas Industries (NYSE: TXI).
• Smart Modular (NASDAQ: SMOD) was downgraded to Market Outperform from Strong Buy at JMP Securities following the Q4 pre-announcement.
• VASCO Data Security (NASDAQ: VDSI) was downgraded to Market Perform from Outperform at Friedman Billings on valuation.

OTHER DOWNGRADES:

• RAIT Financial Trust (NYSE: RAS) was downgraded to Underperform from Sector Perform at RBC Capital.
• KMG America (NYSE: KMA) was downgraded to Market Perform from Outperform at Friedman Billings on valuation.

Masco Corporation (NYSE: MAS), the huge home-improvement products supplier to companies like Home Depot Inc (NYSE: HD), reported awful revenue results yesterday, reflecting the slowdown in the US housing market. However, the company did an excellent job at controlling expenses by beating margins by a nice amount.

Organic sales were weak, down 9.6% versus expectations of 11%. Total US sales were down 15.7%, however, this was offset by a 21% increase in international sales -- that is a big number and reason why you want keep this company on your radar screen.

Operating margins came in at 11.4% versus estimates of 8.7% -- beating estimates by almost 270bps, a sign of very good management.

Also, the company is buying back a ton of stock, purchasing 9 million shares in the most recent quarter with 27 million shares remaining on the buyback.

Masco will be a high flier once its revenue decline ends. I'd put this stock on the list of stocks to own when the housing supplier inventory overhang is over.