1. The Dow, the S&P 500 and the Nasdaq open higher after the slowest annual increase in consumer inflation in two years. CPI in May up 0.1% month over month and up 4% year over year. Excluding volatile food and energy prices, the picture not as optimistic. Fed meeting Tuesday and Wednesday. Market odds for an interest rate hike pause now over 90%.
2. Home Depot (HD) affirms lowered guidance given in May after its biggest quarterly revenue miss in more than 20 years. Nothing worse. Dow stock Home Depot holds its investor day Tuesday. Two days before our noon ET Wednesday Club meeting, we added a DIY hardware and tools giant to the Bullpen.
3. Salesforce (CRM) artificial intelligence: Why needed? Time saved and more personalized. Bank of America came away from the Club name’s Investor Day declaring CRM an “AI winner.” JPMorgan says “uniquely positioned.” BMO Capital sees AI as a net positive.
4. Oracle (ORCL): Larry Ellison says ORCL cloud is best for AI and that’s why things are so strong. It is true that his cloud is growing much faster than others and the Cerner acquisition looks like a good one. We own the top three cloud stocks Amazon (AMZN), Microsoft (MSFT) and Alphabet (GOOGL). We recently looked at how AI can help cloud companies do something they haven’t been able to do on their own.
5. Club holding Apple (AAPL): UBS goes to neutral from buy but raises price target to $190 per share from $180. Reason for the downgrade: The analysts see softer iPhone and services growth. While we call Apple and fellow Club name Nvidia (NVDA) “own, don’t trade” stocks, I want to remind members that our mantra does not mean to never take some profits as I explained in my Sunday column.
6. China prepares a broad stimulus. Here you go again. Round up the usual suspects. Support real estate and domestic demand. As we will talk about in our May meeting Wednesday, you want Apple as well as Club name Starbucks (SBUX) and maybe even recently slammed Estee Lauder (EL). China’s post-Covid recovery has been much slower compared to the trajectories of other countries coming out of pandemic restrictions.
7. What if oil prices collapse here? The Saudis are out of bullets after the kingdom’s additional voluntary 1 million barrels-per-day cut, starting next month. The U.S. is pumping more aggressively than ever, and exporting a quarter of what it produces. What’s to stop the Russians from driving the price down to finance its Ukraine counter-offensive? Our oil names: Coterra Energy (CTRA), Pioneer Natural Resources (PXD) and Halliburton (HAL).
8. Guggenheim praises Netflix (NFLX). Boosts price target to $500 per share from $375. The analysts see NFLX as an “under-appreciated opportunity.” Kept buy rating. This PT increase is precisely what I dislike most about this moment. Just endless one-upmanship among analysts, leading to multiple expansions. NFLX is not something that deserves a higher multiple. Bank of America increases PT to $490 from $410.
9. Deutsche Bank: “How can Block Get its Mojo Back.” Afterpay rebound must continue; cash app must outperform; pass through EBITDA beats; Pivot toward higher margins; stop with the monthly updates.
10. Student loans: 8% headwind to monthly personal income. Barclays and Wells Fargo say student Loan payments starting back up again is likely to be disruptive. Meaningful changes to behavior are likely for those impacted.
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