Jim Cramer: Why the bond market has become a thorn in the market's side

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A smart bull needs to recognize when the facts change, says Jim Cramer

Mad Money with Jim Cramer

CNBC’s Jim Cramer said Friday that stock investors need to remember the bond market is in the driver’s seat at the moment — a dynamic that looms large ahead of key earnings reports next week.

“The bond market’s wrath can smackdown any stock market no matter how robust,” said the “Mad Money” host.

On Friday, Treasury yields jumped higher as oil prices surged after President Donald Trump told Fox News that he is “not going to be much more patient” with Iran, adding that “they should make a deal.” Concerns about inflation also diminished hopes for interest-rate cuts from the Federal Reserve, Cramer noted.

“We need a tame bond market for stocks to keep advancing, which means we need oil to come down, and that’s not happening unless we get an end to the war,” he said.

Cramer said that in addition to triple-digit oil and one-year highs for the benchmark 10-year Treasury yield, signs of speculative excess in recent IPOs require a more cautious stance toward equities.

“You know haven’t been a doomer…I haven’t been a bear at all. But a smart bull needs to recognize when the facts change and I’m very worried that we’re headed for the kind of reckless flood of IPOs that always leads to heartbreak,” Cramer said. “We aren’t there yet. But we need to be wary of the possibility and we need to protect our gains.”

With that, Cramer turned to the week ahead.

Monday

The head of Caterpillar’s power and energy business, which is benefitting from the data center construction boom, is meeting with Wall Street. While Cramer said he loves the company, he warned the stock’s valuation looks overheated after a major run. “It’s like a tech stock,” he said.

Tuesday

Home Depot — a holding in Cramer’s Charitable Trust, the portfolio used by the CNBC Investing Club —reports after struggling under the weight of higher rates. Cramer isn’t expecting much, but said results that are “not terrible” could spark a relief rally.

Vertiv Holdings, a major data center infrastructure player, could post a huge number, Cramer said, though expectations are already elevated after a massive stock run.

After the close, Cramer’s “favorite homebuilder” Toll Brothers reports. With its focus on luxury homes, Cramer said it’s a decent time for Toll but rising mortgage rates make it tough to own any homebuilding stocks.

Wednesday

Cramer expects Lowe’s, which reports in the morning, to potentially outshine Home Depot given its greater exposure to do-it-yourself consumers in a weak housing market.

After the bell, the spotlight shines on Nvidia.

“If the data center is the most important piece of this economy…then Nvidia is at the heart of the data center,” Cramer said.

He reiterated his long-held view that investors should own, not trade, the stock. Cramer’s Charitable Trust has owned Nvidia since 2019. Still, after its massive run, Cramer said Nvidia will likely need a “perfect quarter” to move meaningfully higher. He said he thinks it may deliver one.

Thursday

Walmart reports, and Cramer remains bullish. “I remain convinced that Walmart is one of the greatest companies of the era,” he said, praising its broad appeal and value proposition.

Software company Workday also reports as investors debate whether artificial intelligence will disrupt traditional software-as-a-service businesses. While Cramer said he doesn’t expect weak results, he warned investors remain skeptical about software names.

Friday

BJ’s Wholesale Club reports. Cramer said there may be a catch-up opportunity in the smaller retailer, though Costco remains his long-term favorite. Costco is also a holding in the Charitable Trust.

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Jim Cramer looks ahead to next week’s market game plan

Mad Money with Jim Cramer

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