Jim Cramer attributes rally to earnings, less noise from White House

CNBC’s Jim Cramer analyzed the market’s rally over the past few sessions — which followed days of staggering losses — pointing to strong earnings results and the White House’s backtrack on its rebuke of Federal Reserve Chair Jerome Powell.

“We had some of the best pin action off earnings that I’ve seen in ages. It was pure joy as we watched one lead pin after another slash and slam the sticks behind it… strike after strike after strike,” he said. “Throw in total radio silence from the White House on anything business-related, and you end up with a nice, powerful rally.”

On Thursday, the S&P 500 climbed 2.03% , the tech-heavy Nasdaq Composite popped 2.74% and the Dow Jones Industrial Average managed to add 1.23%. The indexes broke a four-day string of losses on Tuesday and have continued to close in the green so far this week. Megacap tech stocks spearheaded the rally, as Nvidia, Meta, Amazon, Tesla and Microsoft saw shares rise.

There are many factors that contribute to a “meaningful, multi-day rally like this one,” Cramer explained. For example, he said, a batch of strong earnings reports delivered a positive surprise for those on Wall Street dreading a recession stoked by global trade wars. Investors were encouraged by the success of enterprise software outfit ServiceNow, whose last quarter disappointed, Cramer continued. Power utility GE Vernova, semiconductor outfit Texas Instruments and tech infrastructure maker Vertiv all beat the estimates, he added.

An industrial and tech rally necessitates a slowdown in certain “safety stocks,” Cramer posited, and he pointed out that names like Procter & Gamble and PepsiCo saw shares slide after earnings failed to impress. These safety stocks pulled back and “the most aggressive stocks in the room” roared, he said.

The White House’s restraint in response to China, after it denied that trade talks were in process, also benefited the market, Cramer said. He emphasized the government’s power over stocks, noting that President Donald Trump’s threat to fire Powell sent Wall Street reeling. Many respect the central bank leader and see him as “a symbol of effective, independent leadership” that is uncommon right now, Cramer said. Trump’s assertion was not only illegal, but “a trashing too far,” and investors worried that Powell’s removal would lead to much broader chaos, he continued.

“Nobody in this industry trusts elected politicians to control interest rates,” Cramer said. “If the President can just fire the Fed chief, rates will always be kept low — we’ll develop a serious, long-term inflation problem.”

Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.

Disclaimer The CNBC Investing Club holds shares of Nvidia, Meta, Amazon and Microsoft.