Jim Cramer Says Earnings Season Will Fuel Market's Record Run, But Warns Of This 'Horrendous' Headwind That Could Apply Brakes To Rally

The S&P 500 and the Dow Jones Industrial Average are perched at record highs, while the Nasdaq Composite is on the cusp of joining its major counterparts in record territory. Unfazed by the stretched valuations, CNBC Mad Money host Jim Cramer on Monday raised the specter of further upside.

Earnings Boost: The market isn’t overbought and therefore there is room to run, Cramer said in a post. The stock picker apparently sees earnings as one of the biggest catalysts that can propel stocks higher.

Earnings tomorrow and the market isn't overbought so there is room to run but the pesky bonds are back open tomorrow and they have been horrendous

— Jim Cramer (@jimcramer) October 14, 2024

The earnings flow resumes after a pause on Monday owing to the Columbus Day holiday.

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JPMorgan Chase & Co. (NYSE:JPM) kickstarted the big bank earnings on Friday with a splash. The shares ended the session up over 4% after the third-quarter results came in ahead of expectations. JPMorgan’s peer Wells Fargo & Company (NYSE:WFC) also reported encouraging earnings.

More earnings will follow on Tuesday and notable among those reporting are:

• Bank of America Corporation (NYSE:BAC)
• Charles Schwab Corporation (NYSE:SCHW)
• Citigroup Inc. (NYSE:C)
• Goldman Sachs Group, Inc. (NYSE:GS)
• PNC Financial Services Group, Inc. (NYSE:PNC)
• Johnson & Johnson (NYSE:JNJ)
• UnitedHealth Group Incorporated (NYSE:UNH)
• Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
• J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT)
• United Airlines Holdings, Inc. (NASDAQ:UAL)

Data compiled by FactSet shows cumulative earnings of S&P 500 companies rising by 4.1% in the third quarter. Although a slowdown from the 11.2% growth in the second quarter, the profit growth streak will likely extend to five quarters.

Downside Risk: Cramer termed the bond market performance “horrendous,” potentially upsetting the equity market’s rhythm. “But the pesky bonds are back open tomorrow and they have been horrendous,” he said.

The bond market was closed on Monday and will reopen on Tuesday.

Bond yields have begun to tick higher, especially after the September non-farm payrolls report surprised to the upside. The upward move solidified after the consumer price inflation for September came in more than expected.

The 10-year bond yield dipped under 3.6% in mid-September but has rallied above 4% since then, as investors unwind some of their aggressive rate-cut bets.

In an interview with CNBC, Fund Strat Head of Research Tom Lee said the unseasonable market trend showed macro data has become less important. A lot of cash that has remained on the sidelines is flowing back to the market, he said, adding that the economy has remained resilient as opposed to expectations for a recession.

When asked about the days when the market came back up from steep losses in the futures market and finished solidly higher, the strategist said skeptical investors, wary of a potential recession that never materialized, have remained under-invested in stocks. Earnings have also been resilient, he added.

The SPDR S&P 500 ETF Trust (NYSE:SPY), an exchange-traded fund that tracks the S&P 500 Index, rose 0.82% to $584.32 on Monday, according to Benzinga Pro data, marking a record closing high.

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