Within the rotation out of know-how shares, an optimistic forecast for main banks is misplaced
Every weekday, CNBC Investing Club with Jim Cramer publishes the Homestretch — an actionable afternoon update, just in time for the final hour of trading on Wall Street. Market Slide: The S&P 500 gave up earlier gains and fell throughout Tuesday afternoon, led by mega-cap technology stocks. Ahead of Wednesday afternoon's post-Fed meeting press conference, where Federal Reserve Chairman Jerome Powell will announce upcoming rate cuts, the market continued to dump shares of companies that don't need lower rates to outpace and raise rates. Instead, investors continued to buy shares of companies whose prospects significantly improve in a low-rate environment. One example of this dynamic is club name Nvidia, which doesn't need rate cuts to boost demand for its artificial intelligence GPUs, but lower rates could mean a windfall for Stanley Black & Decker if lower mortgage rates revive sales of older homes that need repairs and remodeling. Nvidia fell 5% on Tuesday. Stanley Black & Decker, also a portfolio holding, gained more than 9% in an earnings-driven rally that extended last week's advance. We don't know how long this rotation will last, but that's exactly what's playing out right now. Banks shine: Lost in the shuffle of earlier earnings reports and another sell-off in tech companies was a bullish view of large-cap banks from Morgan Stanley analyst Betsy Graseck. We read Graseck closely because of her previous big views. In January, Graseck and her team upgraded their view of large-cap banks to “attractive” and upgraded Citi, Goldman Sachs and Bank of America to an overweight buy rating. By then, Morgan Stanley had already assigned club names Wells Fargo and JPMorgan an overweight rating. It was a good view. Now Graseck is back after second-quarter earnings and has raised price targets for nearly every bank in her coverage. In her quarterly review, she noted that the capital markets recovery is only in the second half, excess capital is supporting higher buybacks next year, and net interest income is starting to rise at a handful of banks. Longer term, Grasck believes banks are trending toward their bull case due to lower expected loan losses. Up next: It's a big earnings night, as club stocks Microsoft, Advanced Micro Devices and Starbucks are set to report. Some other names to keep an eye on include Arista Networks, Pinterest, First Solar, Caesars Entertainment and Electronics Arts. Before the market opens on Wednesday, we'll get results from club stocks GE Healthcare and DuPont. Boeing, Norwegian Cruise Line, Mastercard, Humana, Trane Technologies and Kraft Heinz will also report. Club stock Meta Platforms will report after the market closes on Wednesday. (A complete list of stocks in Jim Cramer's Charitable Trust can be found here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after he issues a trade alert before buying or selling a stock in his charitable foundation's portfolio. If Jim has discussed a stock on television on CNBC, he will wait 72 hours after the trade alert is issued before executing the trade. THE INFORMATION REGARDING INVESTING CLUB PROVIDED ABOVE IS SUBJECT TO OUR TERMS OF SERVICE AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY EXISTS AND WILL NOT BE CREATED BY RECEIVING INFORMATION RELATED TO INVESTING CLUB. NO PARTICULAR RESULT OR PROFIT IS GUARANTEED.
Every weekday, CNBC Investing Club with Jim Cramer publishes the Homestretch – an actionable afternoon update, just in time for the final hour of trading on Wall Street.
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