What is the impact of earnings season on the broader markets?
As earnings season enters full swing, the majority of results have marked a strong showing from corporate America. However, the continued impact of the delta variant of the coronavirus and inflation fears have proven major headwinds.
Marking the beginning of what Jim Cramer called a three-day correction, markets sharply sold off Monday, July 19, only to rebound higher through the rest of the week.
Monday saw the Dow plunge over 800 points.
As of premarket trading Friday, futures pointed higher on strong earnings from the social media stocks and Dow component Honeywell (HON) - Get Honeywell International Inc. (HON) Report, signaling that markets could end the week higher.
So what's behind the scattered market action? When asked the most important factor driving the broader markets during his monthly Action Alerts PLUS call, Cramer said earnings season simply takes the cake.
"There are 12 weeks a year where companies drive what's happening, and that's earnings season and we're in one of those 12 weeks," Cramer said.
And yes, Cramer said earnings matter more than even the inflation fears dominating the minds of pundits across Wall Street.
Cramer said that markets could rally when the 10-year Treasury yield reverses and interest rates head higher because earnings are "so good."
"Right now, we're following the companies," Cramer said. "There are 40 weeks where they don't matter and it's just the 10-year, but right now, it's the companies themselves."