Cramer says falling oil prices boosted stocks but warns Fed meeting could reverse gains

CNBC's Jim Cramer on Friday said falling oil prices helped revive the stock market, but warned that next week's Federal Reserve meeting could quickly change the outlook for investors.

"Thank heavens oil went down today," the "Mad Money" host said. "It changed everything."

Stocks rebounded Friday as oil prices retreated, helping the major averages recover some of their losses after four straight down sessions. The Dow Jones Industrial Average traded 509 points higher, or 0.98%, while the S&P 500 and Nasdaq Composite gained 0.86% and 0.96%, respectively.

Technology stocks helped lead the recovery, thanks to positive updates from Adobe and Oracle after the bell Thursday. Cramer said the reports breathed new life into beaten-down enterprise software and data center stocks, pointing to Dell , Vertiv , Cisco , Marvell , GE Vernova and Hewlett Packard Enterprise as potential beneficiaries. Cramer's Charitable Trust, the portfolio run by CNBC's Investing Club, owns shares of GE Vernova.

With few major earnings reports on tap, Cramer said next week's market action will largely hinge on oil prices and interest rates.

The first major variable is the war in Iran. Cramer said progress toward peace could send oil prices sharply lower, helping ease inflation and pressure on interest rates. But he warned renewed fighting could quickly reverse Friday's relief.

"If Iran decides to attack a carrier group with drone swarms, though, then oil will spike, interest rates fly up, and the stock market will get clobbered," he said.

Investors will also turn their attention to Salesforce's annual Dreamforce conference, which kicks off Monday in San Francisco. Cramer will interview CEO Marc Benioff on Wednesday and other executives at the event throughout the week.

The biggest scheduled event comes Wednesday, when the Federal Reserve's Open Market Committee meets. Cramer said the consensus expects policymakers to raise rates to rein in persistent inflation.

He will be watching how longer-term Treasury yields respond. The 30-year Treasury yield could actually fall following a rate hike, he said, if bond investors view Fed Chairman Kevin Warsh's decision as evidence of greater discipline on inflation.

Still, Cramer warned that another rate hike would make an already difficult investing environment even tougher. "If the Fed tightens, the bulls will be fighting the Fed, and it's never a good idea to fight the Fed," he said, urging investors to be selective when putting cash to work and to avoid using margin.

The impact of higher rates will also be in focus when Lennar reports after Wednesday's close. Cramer said stubbornly high mortgage rates continue to weigh on housing demand as homeowners with low existing mortgage rates remain reluctant to move.