Jim Cramer says earnings season will fuel market’s record run, but warns of these ‘horrible’ headwinds that could dampen rally

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The S&P 500 and the Dow Jones Industrial Average are at record highs, while the Nasdaq Composite is poised to join its major peers in record territory. Unfazed by the high ratings, CNBC hosts Mad Money Jim Kramer on Monday raised the specter of further upside potential.

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Profit boost: The market is not overbought and therefore there is room to run, Cramer said in a post. The stock picker apparently sees profits as one of the biggest catalysts that can push stocks higher.

Revenue flow resumes after a lull on Monday due to Columbus Day.

JPMorgan Chase & Co. (NYSE:JPM) kicked off major bank profits with a big bang on Friday. Shares ended the session more than 4% higher after better-than-expected third-quarter results. Wells Fargo, peer of JPMorgan & 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 that cumulative profits for S&P 500 companies rose 4.1% in the third quarter. Although there is a slowdown from the 11.2% growth in the second quarter, earnings growth is likely to continue for up to five quarters.

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Downside risk: Cramer called the bond market’s performance “terrible,” which could potentially disrupt the rhythm of the stock market. “But the nasty bonds are open again tomorrow and they’ve been terrible,” he said.

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

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Bond yields are starting to rise, especially after September’s nonfarm payrolls report surprised on the upside. The upward movement became stronger after consumer price inflation for September came in higher than expected.

Ten-year bond yields fell below 3.6% in mid-September but have since risen above 4% as investors have pared some of their aggressive rate cuts.

In an interview with CNBC, Fund Strat’s head of research Tom Lee said the unusual market trend showed that macro data has become less important. A lot of money left on the sidelines is flowing back into the market, he said, adding that the economy has remained resilient, contrary to expectations for a recession.

When asked about the days when the market rebounded from steep losses in the futures market to finish solidly higher, the strategist said skeptical investors, wary of a potential recession that never materialized, are still underselling stocks invested. 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, an all-time high, according to Benzinga Pro data.

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This article Jim Cramer Says Earnings Season Will Fuel Market’s Record Run, But Warns These ‘Horrible’ Headwinds Could Brake the Rally originally appeared on Benzinga.com