Software stocks stage a comeback. Plus, why Boeing’s CEO going to China matters
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. The S & P 500 is retreating from record highs Thursday, and the losses picked up steam in the afternoon after The Wall Street Journal reported Saudi Arabia and Kuwait lifted restrictions on U.S. military use of their bases and airspace. The news added to uncertainty surrounding negotiations between the U.S. and Iran over a peaceful reopening of the Strait of Hormuz. Oil was lower for most of the morning but reversed midday. U.S. oil standard West Texas Intermediate crude climbed back above $97 per barrel. Same goes with interest rates, with the yield on the benchmark 10-year Treasury note nearing 4.4%. The AI buildout trade is taking a much-needed breather after parabolic moves in many names. As the AI enablers fell, software stocks staged a comeback, especially those related to cybersecurity. CrowdStrike briefly crossed above $500 a share for the first time since December, and Palo Alto Networks traded above $190 for the first time since January. Both CrowdStrike and Palo Alto Networks are now firmly in the green year to date, breaking away from traditional enterprise software and the dreaded iShares Expanded Tech-Software Sector ETF (IGV). That basket of stocks has been a popular way for investors fearing AI disruption to bet against software stocks. We believe it’s added unwarranted selling pressure on CrowdStrike and Palo Alto because they’re in the ETF but have wider moats around their businesses. Elsewhere in the portfolio, Arm Holdings is the biggest laggard after its earnings Wednesday night, which failed to clear an extremely high bar. One disappointing aspect of Thursday’s action is that even as money rotates out of AI-related tech and industrial stocks, it’s not making its way into healthcare, much to our dismay, given our recent buys of Cardinal Health and Johnson & Johnson . Boeing is bucking the down market. Shares traded higher after CNBC reported CEO Kelly Ortberg is expected to join President Donald Trump on his trip to China next week. This adds to the growing evidence that a major China order will be announced at the Beijing Summit. One could argue the anticipated order — reportedly up to 500 planes — is already priced into Boeing’s stock price. We beg to differ. Just last week, Boeing shares sold off hard when its main rival Airbus secured an order of more than 100 jets valued north of $20 billion before discounts, according to the South China Morning Post. The Post also called Boeing’s potential deal with China “elusive” due to previous uncertainty around the timing of Trump’s planned to visit China. What this tells us is that the market still has some doubt and is holding a “we’ll believe it when we see it” attitude. Keep in mind: The summit still has to go well or else an order could slip. While a massive order from China would add to Boeing’s multiyear backlog, the company’s investment story is also about increasing deliveries as it ramps up production. If Boeing can rebuild the market’s trust and consistently hit its monthly production targets, investors will gain more confidence in the company’s free cash flow trajectory — arguably its most important financial metric. In addition to Boeing, Semafor reported CEOs from Apple , Nvidia , Exxon Mobil , Qualcomm , Blackstone , Citigroup , and Visa will be invited by the Trump administration to the summit. Unlike our optimism on Boeing, we’re hesitant to view a potential Jensen Huang appearance as a sign that Nvidia’s AI chips are on the verge of returning to the Chinese market. If it happens, great. But it’s not something we are underwriting until it actually does. Jensen said in March that Nvidia was “restarting our manufacturing” to meet orders from some Chinese customers, but we’re not sure anything has come of it yet. It’s another busy night of earnings with CoreWeave , Iren , Coinbase , Affirm Holdings , McKesson , Cloudflare , Airbnb , and Expedia all scheduled to report. There are no major earning reports before the opening bell on Friday. On the data side, we’ll see the April nonfarm payroll report. Economists polled by FactSet expect job additions of 65,000 with the unemployment rate staying unchanged at 4.3%. Average hourly earnings are expected to have increased 3.8%, compared with 3.5% increase in March. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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