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Cramer: What Kind of Economy Is This?

U.S. stocks rallied across the board Wednesday, with the Dow and S&P 500 logging their best one-day gain in 2012, leading “Mad Money” host Jim Cramer to explain just how it happened.

To start, Cramer noted that European Central Bank released a statement that helped to calm investors’ fears over the region’s sovereign debt crisis. The ECB held its key interest rate unchanged at 1 percent, which was largely expected. President Mario Draghi pledged it will act in a timely manner on inflation. He added he expects inflation to stay above 2 percent this year and to ease to between 1 percent and 2 percent next year.

In addition, the White House announced President Barack Obama is now in talks with European leaders, increasing speculation that a deal may be near.

With Europe out of the focus, Wall Street directed its attention toward the U.S. economy. As Friday's bleak jobs report proved, American companies haven’t been hiring, but Cramer said he’s hearing a lot of positive things about individual stocks.

Take Snap-on, for example, which makes automotive tools. CEO Nicholas Pinchuk told Cramer Wednesday that business is going well. His comments confirmed what car deal AutoNation said earlier in the week, where new car sales had increased by 45 percent.

Unfortunately, though, the U.S. is a “cash rich and confidence poor” nation right now, Pinchuk added. Without confidence, Cramer doesn’t think American business owners will hire.

But if you can look past Europe and the paltry employment data, there are bullish signs in other sectors, too, Cramer said. Credit Suisse on Wednesday upgraded a couple homebuilders. The upgrades make sense to Cramer because home sales are strong, traffic is great and home prices are increasing.

The positives extend to discretionary spending, as well, he noted. Dick's Sporting Goods caught an upgrade Wednesday, prompting its stock to rally.

Meanwhile, Home Depot held its analyst meeting Wednesday, where Cramer heard more bullish commentary than he has in years.

So what’s the bottom line? Investors were able to buy shares of the companies that are doing well, but only because there weren’t being distracted by Europe or the sour employment situation in the United States.

—CNBC.com contributed to this report

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

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