Each weekday, Jim Cramer's CNBC Investing Club delivers the Homestretch, an actionable late-afternoon market update, timed perfectly for the final trading hour on Wall Street. On Friday, the stock market experienced a pullback, concluding a week marked by volatility. The major indices were notably impacted by a decline among hyperscalers, including Amazon, Alphabet, Meta Platforms, and Microsoft. The S&P 500 is projected to dip over 1%, while the Nasdaq faces a drop exceeding 2%, with the Dow remaining relatively stable for the week. Early selling pressure primarily affected semiconductor and AI infrastructure stocks, although several companies such as Micron, Sandisk, GE Vernova, Eaton, and Qnity Electronics managed to bounce back as buyers capitalized on lower prices.
Here are four quick insights from Jim: Interest in tech is expanding into aerospace, which is seeing increased investment. For instance, GE Aerospace has risen nearly 3%, while Honeywell Aerospace, a portfolio favorite, is up over 2%. While you can consider investing in one tech stock, it's wise to hold off until the end of the trading day, as there could be panic selling from those using margin. The healthcare sector appears promising in the near term; stocks like Abbott Labs warrant attention, but Jim suggests Johnson & Johnson as a clear winner following a strong quarterly performance. The outlook for industrials is challenging due to exposure to data centers, leading Jim to recommend transportation stocks like FedEx and FedEx Freight for more reliable opportunities.
In another development underscoring the fierce competition for AI talent, long-time Amazon Web Services executive Dave Brown is reportedly leaving after 19 years to potentially join Meta. Brown, who led AWS's compute and machine learning services, was at the helm of critical AI infrastructure initiatives, including Amazon's custom Trainium AI chips. During an interview earlier this year with the Investing Club, he emphasized the importance of enhancing "price performance," which enables businesses to gain competitive advantages by securing more computational power at reduced costs. This strategy gains significance as AI models require greater computational resources. If Brown aligns with Meta, it could enhance their aspirations to establish a cloud computing division, a prospect CEO Mark Zuckerberg acknowledged as being "definitely on the table" during a shareholder meeting this past May. Earlier this month, Jim verified that Meta intends to offer computing resources to external clients as a new revenue channel. In related news, the New York Times reported that Anthropic is negotiating a deal to lease computing power from Meta, potentially worth up to $10 billion over two years. CNBC's Kate Rooney affirmed this report, citing insider information that the talks are still in very early stages.
Next week, earnings reports ramp up, with around 80 companies in the S&P 500 and six in the portfolio expected to disclose results. Following recent assessments of major banks, Jim found Goldman Sachs to be the standout, while Wells Fargo also showed significant improvement, which the market eventually rewarded. Next week will predominantly focus on industrial, automotive, and defense sectors; however, major tech earnings are also on the calendar, including reports from Alphabet and Intel. As the first of the hyperscalers to report, Alphabet's comments on capital expenditures and its recent $84.75 billion equity offering from June will be closely watched.
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