Jim Cramer looks ahead to Friday’s employment data: ‘We’re at the mercy of macro numbers’

CNBC's Jim Cramer reviewed Tuesday's market-wide decline, attributing much of the pullback to some investors' worries about inflation in the run-up to new employment data.
"We have too much inflation in the system. The Fed can't do anything about it because it just 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 good place to be."

Reviewing Tuesday's market-wide decline, CNBC's Jim Cramer attributed much of the pullback to investors' worries about inflation in the run-up to new employment data as well as a lack of faith in the Federal Reserve's decision-making.

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"We have too much inflation in the system. The Fed can't do anything about it because it just 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 good place to be."

The major indexes sank by close, with the tech sector hit especially hard. Tuesday also saw two economic surveys come in higher than expected, suggesting inflation remains persistent, and long-term Treasury yields rose. Investors are anticipating Friday's nonfarm payroll data, a key inflation metric for the central bank. The Fed made three consecutive cuts towards the end of 2024, but after the latest meeting, it indicated there might be fewer reductions to come in 2025.

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Cramer stressed that this market is unpredictable, saying that usually when interest rates shoot up, all stocks head lower. But Tuesday saw top performers in Big Tech get dinged, while bruised sectors like drugs, oils and transports actually saw gains, he said. Cramer also said investors can be too quick to flee tech stocks when inflation anxiety heats up, saying these stocks are actually poised to do well in an inflated environment.

However, he cautioned against buying heavily into this weakness with labor data coming so soon. If employment and wages rise, or President-elect Donald Trump says mass deportations are on the horizon — which could cause mass wage inflation — the market will get crushed, especially tech stocks, Cramer continued. He called nonfarm payrolls "authoritative," saying they "control the dialogue."

"I don't want to make too much out of one session. 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 need some signal, some sign, that the Fed did the right thing when it cut rates, or else we'll have more days like today when long rates go up and a lot of stocks go down."