Mad Money

Did two-thirds of the economy just come back?

Don't bet against the consumer

(Click for video linked to a searchable transcript of this Mad Money segment)

It was a subtle thing, nonetheless Jim Cramer thinks it's a sign the economy might not be as bad as feared.

That is, on Wednesday retail stocks rallied sharply with the XRT closing almost 2% higher. "Pretty much every place you shop closed higher," Cramer said. "And it's terrific news for a stock market."

Largely Cramer takes the price action as a sign that most the negatives have finally been priced into the retail sector.

And there have been a lot of negatives.

Adam Jeffery | CNBC

From two consecutive months of to the , there were plenty of reasons to fear that consumers had stopped spending. And when that happens, the stock market often falters because consumer spending drives two-thirds of the economy.

However, recent price action suggests that the Street thinks the worst is over.

Earlier in the week, when it appeared that lackluster earnings from Home Depot and would take down the entire sector, they didn't.

"As we got closer to the morning bell, they were down only a percent. Then, they opened barely down, and then they rallied," Cramer explained

That may have been a turning point.

"Was it an aberration? Nope, because today and it rallied. Also, does a terrible number and it too rallied," Cramer added in support of his thesis.

In other words, Cramer believes the rally in retail stocks reflects growing confidence on Wall Street that the economy isn't as bad as feared; that consumers are spending, albeit selectively.

Read more from Mad Money with Jim Cramer
Serious catalyst looming on edges of market
Price target bump reminiscent of Dotcom Bubble?
Momentum Monsters: Cramer's favorite hyper-growth plays

If stores as wide ranging as Abercrombie & Fitch, Advanced Auto Parts and Zale Corp, all rallied, "Maybe, just maybe, things just aren't as bad as we thought," Cramer said.

Call Cramer: 1-800-743-CNBC

Questions for Cramer?

Questions, comments, suggestions for the "Mad Money" website?