What caused the market’s volatile week – plus, 7 stocks we traded
Stocks bounced back Friday, but not enough to recover the week’s earlier losses. All three major averages posted gains — with the Dow Jones Industrial Average and the S & P 500 each adding about 1%, while the Nasdaq Composite advanced 0.9% — after New York Fed President John Williams suggested that a December rate cut was still on the table. He argued that labor-market weakness poses a greater threat to the country’s economy than higher inflation. Expectations for a rate cut next month spiked: On Friday, the market was pricing in roughly 71% odds of a 25-basis-point reduction next month, according to the CME FedWatch Tool. It was a major reversal from just a day earlier, when the odds were just 39%. Indeed, investor sentiment was low on Thursday, following the delayed release of September’s jobs report , which muddied the picture for another cut this year. Investors also continued to worry about the valuations of companies tied to artificial intelligence and their massive spending on data centers. Even with Friday’s moves, the three major averages still posted big losses this week. The S & P 500 finished down about 2%, as did the 30-stock Dow, while the Nasdaq shed 2.7%. .SPX YTD mountain S & P 500 (SPX) year-to-date performance Earnings Nvidia ‘s quarterly earnings report also moved the market. Wall Street always watches the company’s release closely because many see the chipmaker as a gauge for the health of the artificial intelligence trade and overall market. Nvidia posted stellar results Wednesday evening that beat the Street’s estimates on the top and bottom lines. Management also raised its current-quarter sales guidance. The Club raised its price target to $230 from $225 and maintained a hold-equivalent 2 rating on the stock. Shortly after that, the stock market experienced a dizzying rally into Thursday morning, which boosted megacap tech and AI ancillary plays. The rebound faltered, however, in the afternoon. Other earnings we tracked came from the following Club names: Home Depot , Palo Alto Networks , and TJX Companies. Home Depot on Tuesday posted a quarterly earnings miss and management lowered the company’s full-year outlook. Shares declined following yet another lackluster quarterly report for the home improvement retailer. We still think it’s one of the better ways to play falling rates. As a result, the Club bought additional Home Depot shares shortly after the release. We did cut our price target to $420 from $440 to reflect management’s updated forecast. TJX Companies on Wednesday morning beat on the top and bottom line for the quarter. In fact, the off-price retailer delivered better-than-expected results in each of its four operating segments for the third quarter in a row. The retail stock fell on the results, but we saw the decline as profit-taking rather than a fundamental issue. After all, TJX has been a bright spot in the lagging retail sector. The Club raised its price target on TJX to $160 from $150 and maintained a buy-equivalent 1 rating on the shares. Palo Alto Networks delivered a beat-and-raise quarter Wednesday evening. The cybersecurity leader topped estimates on key metrics like next-generation annual recurring revenue (ARR), which is important for Palo Alto because it can highlight the success of management’s “platformization” strategy of bundling its products and services. The company’s decision to acquire cloud management and monitoring platform Chronosphere was brilliant, too. The deal, valued at around $3.35 billion, could make Wall Street analysts more bullish on the cyber stock, given Chronosphere’s solid ARR growth. Portfolio moves Home Depot wasn’t the only trade we made this week. We did six others, which included the initiation of a new stock. Plus, we added two names to the Bullpen. Consumer-packaged goods giant Kimberly-Clark and drugmaker Johnson & Johnson were added to the Bullpen Monday as the Club looks for opportunities outside of the AI trade. In the case of Kimberly-Clark, the stock has been unfairly punished since the company announced its plan to buy the maker of Tylenol, Kenvue, a few weeks ago. But there’s a lot to like about the deal. With Kenvue under Kimberly-Clark’s belt, the combined company would own ten different $1 billion brands. It would also become the second-largest consumer packaged goods company in the world. For Johnson & Johnson, we like the stock in part because of its strong oncology portfolio. A day later, the Club slashed its Disney position in half following a disappointing earnings report earlier in November. We realized a roughly 3% gain on shares purchased between 2022 and 2023. “The company is in much better shape today than it was three years ago, with an improved balance sheet and cost profile. However, it hasn’t been able to offset secular declines in its linear networks business as quickly as we’d hoped,” we said in our trade alert. On Wednesday, we exited our Disney position entirely. We sold Eli Lilly stock on Tuesday, locking in a 330% gain on a 2022 purchase. The Club raised its price target on Eli Lilly to $1,100 from $925 per share and downgraded it to a hold-equivalent rating of 2. Shares reached an all-time high on Friday, surpassing $1 trillion in market capitalization. Lilly’s now the first pharmaceutical company to ever do so. We took the cash raised from that Lilly sale, along with Disney trim earlier this month, and started a new position in Procter & Gamble . It may have come as a surprise to members as we added a different consumer-packaged goods name, Kimberly-Clark, to the Bullpen earlier this week. But we now think Procter & Gamble is better run. “Procter & Gamble has one of the strongest growth track records in its category,” we said in our trade alert. “The consumer brand powerhouse behind such staples as Tide, Crest, and Gillette saw its most recent earnings result mark the 40th consecutive quarter of organic sales growth, which kept the business on track for its 10th straight year of core earnings per share growth.” In addition to our Disney exit on Wednesday, the Club bought more shares of DuPont spinoff Qnity Electronics . The stock has dropped throughout the month, which we saw as an opportunity to scale up our position. We like Qnity for its exposure to semiconductor industry growth. Finally, the Club bought more Corning shares on Thursday amid the broader market selloff. “Our discipline is always to look for high-quality companies to buy when the market is getting oversold, so we are holding our nose and nibbling on shares of Corning, a leader in fiber optic cables, into this weakness,” we said in our trade alert. (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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