There are two economies at stake right now, and "right now they are out of sync" based on the results Wall Street has seen so far, CN Cracker said Jim Cramer on Wednesday.
The US consumer is still strong, as the results the banks put in, but the railway company CSX tells a different story, he said.
Shares in CSX fell more than 10% in the session after the transport giant lost earnings per share and revenue in the second quarter. The company now believes that revenues will fall to 2% by 2019 after growth forecasts reach as high as 2%, causing CEO James Foote to call the economy "one of the most confusing I have experienced in my career."
Negative The results of a railway tend to pull the rest of the industry, Cramer said. Units in Union Pacific dropped about 6%, and Norfolk Southern dropped more than 7%. The former reports the earnings Thursday and the latter reports next week.
The Dow Jones Transport Average, which tracks the US transport sector, fell more than 3.5%, the worst season this year. As of Tuesday, economists expect the economy to rise by 1
CSX's Foote also said that "many of our customers' volumes continue to show weakness."
For those bulls who expect the Federal Reserve to cut interest rates this summer, Cramer said they better hope President Jerome Powell focuses on CSX's conference call in instead of what the banks say.
"We need Fed boss Jay Powell to listen to tonight's great CSX conference call," said the Mad Money host. "At the same time we need him to ignore the bank conference calls, like the good we got from Bank of America."
Bank of America told shareholders that profits in the second quarter increased 8% from a year ago, a total of $ 7.3 billion, driven by its bank. Investors earned 74 cents per share, which peaked at 71 cents.
Bank managers like Bank of America CFO Paul Donofrio, rooting in a reduction in the benchmark price – currently 2.25% to 2.5% – argue that it would slow net interest income, which has been a major driver of profits.
Retail sales last month increased 0.4% when economists predicted 0.1%, coinciding with what happens in business investments.
"If you think Bank of America, J.P. Morgan and Citigroup – and why not – consumers are right in the sweet spot," Cramer said. "Based on what happens in the consumer economy, you can easily make the case for more interest rate increases here."
The major US indices recorded their second fast day of losses, with the Dow Jones Industrial Average and the Nasdaq Composite slipping more than 0.4%. S & P 500, falling 0.65%, posted its worst day in three weeks.
"I can't think of another time … where the consumer was in such good shape while the industries were in so much trouble," Cramer said. "Normally, the other one increases, or vice versa. Unfortunately, it doesn't work right now."
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