Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. (We’re no longer recording the audio, so we can get this new written feature to members as quickly as possible.)
Markets slide: Stocks initially popped Friday after the goldilocks-ish February jobs report, but the fever finally broke in the red-hot semiconductor group, causing technology and other related stocks that looked overextended and a little “toppy” to give up gains.
“I sense that tech is taking a breather because of the reversals. Once the market took down Broadcom, Marvell, and MongoDB it decided to take down the rest of tech,” Jim Cramer said.
Shares of Club holding Broadcom fell more than 6% Friday following its fiscal first-quarter earnings report a night earlier. The reasons behind the pullback: A sky-high bar into earnings due to the stock’s doubling in the past year, lack of full-year outlook raise despite the quarterly beat, and a general breather in the frenzied chip-stock trade. But don’t let the stock action lead you to think otherwise about the quarter – the results were strong.
“Broadcom is the real deal, but the quarter only had 10 weeks of VMWare and the $10 billion in AI is not enough to keep it up. I don’t like to buy the first dip in this stock. Please wait for the second,” Jim said.
Nvidia falls: Even with Nvidia down more than 5% Friday, shares of the leading artificial intelligence chipmaker are still on track for weekly gains of more than 6%. The move comes ahead of its Nvidia’s annual GTC conference, which kicks off March 18 and is often viewed as a catalyst for the stock. However, could danger been lurking in the market?
“In 10 days, we get [Nvidia CEO Jensen Huang’s] keynote, which happens to coincide with the cycle downturn that Larry Williams has been calling for,” Jim said, referencing a technical analysis segment on “Mad Money” on Tuesday night.
As discussed on the show, the charts interpreted by Williams, a market historian whose work is frequently featured on “Mad Money,” suggested the Nasdaq and S&P 500 could go through a rough patch beginning in the next week or two that could extend through the end of May.
“Larry got bearish two months ago and it hasn’t really worked, but he is reiterating that we are going into a very tough time particularly for Nvidia,” Jim explained. “I say wait to see what happens.”
Hunt for yield: Although tech led the market lower Friday, the S&P 500’s real estate, utilities, financials, energy sectors, along with some health-care stocks, fared much better. One common link between these different sectors is that many of them pay good dividends, which look a lot more attractive when interest rates dip. And that’s what’s happening Friday.
Club holding Wells Fargo, which pays a yield of about 2.50% and has plenty of buyback firepower, is on pace for a new 52-week closing high. “We are starting to see the return of greatness for Wells Fargo. But this stock is still not back to where it was six years ago,” Jim said.
Lilly stumbles: Eli Lilly shares remained pressured after its Alzheimer’s treatment hit another snag with the Food and Drug Administration. While the news doesn’t change our Eli Lilly thesis because of how dominant its diabetes and obesity portfolio is, we’re not surprised to see the stock get dinged on the news. “Lilly was a little too aggressive in its ‘approval by end of March’ [timeline] for its dementia drug,” Jim said. “Was it too promotional and therefore crossed the line with the FDA? Hard to know, but I regard it as a setback.”
New ideas?: “Gap … may be Bullpen material,” Jim said, referring to the Club’s watchlist of stocks to consider for the portfolio. “The turn is just beginning at Old Navy and Gap and hasn’t even started at Athleta and Banana Republic.”
“Mattel CEO Ynon Kreiz gave me high praise about Gap CEO Richard Dickson and I think he is deserving of it,” Jim added.
Dickson, who joined the retailer from toymaker Mattel in August, appeared on “Mad Money” on Thursday following earnings. Gap shares jumped 4% Friday, but are still in the red for the year.
(See here for a full list of the stocks in Jim Cramer’s Charitable Trust.)
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