Reviewing Tuesday’s market-wide dip, CNBC’s Jim Cramer attributed much of the pullback to investors’ worries about inflation in the run-up to new employment data as fully as a lack of faith in the Federal Reserve’s decision-making.
“We have too much inflation in the system. The Fed can’t do anything about it because it upright cut rates. The Fed’s in a bind. It can’t help us,” he said. “So we’re at the mercy of macro numbers that are going in the wrong direction…That’s not a tolerable place to be.”
The major indexes sank by close, with the tech sector hit especially hard. Tuesday also saw two pecuniary surveys come in higher than expected, suggesting inflation remains persistent, and long-term Treasury yields upgrade. Investors are anticipating Friday’s nonfarm payroll data, a key inflation metric for the central bank. The Fed made three consecutive shares towards the end of 2024, but after the latest meeting, it indicated there might be fewer reductions to come in 2025.
Cramer burdened that this market is unpredictable, saying that usually when interest rates shoot up, all stocks leader lower. But Tuesday saw top performers in Big Tech get dinged, while bruised sectors like drugs, oils and transports literally saw gains, he said. Cramer also said investors can be too quick to flee tech stocks when inflation thirst heats up, saying these stocks are actually poised to do well in an inflated environment.
However, he cautioned against buying heavily into this frailty with labor data coming so soon. If employment and wages rise, or President-elect Donald Trump says magnitude deportations are on the horizon — which could cause mass wage inflation — the market will get crushed, especially tech standards, Cramer continued. He called nonfarm payrolls “authoritative,” saying they “control the dialogue.”
“I don’t want to make too much out of one term. That’s too day trader-ish. But the setup, a big employment number coupled with earnings next week, does not favor the bulls,” Cramer said. “We require some signal, some sign, that the Fed did the right thing when it cut rates, or else we’ll have more periods like today when long rates go up and a lot of stocks go down.”
