Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch, providing an actionable afternoon update just in time for the last hour of trading on Wall Street. In the latest session, the S&P 500 dipped slightly after Federal Reserve Chairman Jerome Powell indicated that a cut in interest rates this December was not guaranteed. This remark came during his post-Fed meeting news conference, following the central bank’s decision to reduce rates by a quarter-point for the second time this year. Notably, there were dissenting votes from Fed Gov. Stephen Miran, who advocated for a half-point reduction, and Kansas City Fed President Jeffrey Schmid, who preferred to maintain the current rates.
Additionally, the Fed announced that its process of unwinding its bond holdings would conclude in December. Powell reiterated the Fed’s commitment to achieving a targeted inflation rate of 2%. Before the decision, the S&P 500 had reached another all-time intraday high.
In the realm of price targets, semiconductor stocks have been soaring, driven by an uptick in demand for generative artificial intelligence applications and improving visibility into projected spending over the coming years. This momentum has resulted in significant gains for Nvidia and Broadcom, with Nvidia climbing approximately 11% and Broadcom rising around 7% over recent days. Both stocks reached record highs, becoming the two largest positions in the Club’s portfolio. Nvidia surpassed a $5 trillion market cap just months after breaching the $4 trillion mark. With quarterly earnings from major tech players such as Meta Platforms, Microsoft, Amazon, and Alphabet on the horizon, investors are eagerly anticipating insights into the companies’ capital investments related to AI. As a result, the price targets for both Broadcom and Nvidia have been raised, with Broadcom’s target now set at $415 per share (up from $350) and Nvidia’s revised to $225 (from $200).
In earnings news, Boeing’s shares fell more than 4% following a $4.9 billion non-cash charge in the third quarter due to further delays related to the 777X wide-body aircraft. While the market had anticipated a charge, the amount exceeded analysts’ expectations by about $900 million. Nonetheless, Boeing reported positive free cash flow for the first time since Q4 2023 and is ramping up production of its 737 aircraft. Despite this encouraging news, trading restrictions prevented further buying on the company’s decline.
In corporate developments, Honeywell is set to complete the spinoff of Solstice Advanced Materials, which will begin trading under the ticker “SOLS.” Shareholders of Honeywell as of October 17 will receive one share of Solstice for every four shares they own. Early analyst coverage of Solstice includes an outperform rating and a $70 price target from BMO Capital Markets, while Vertical Research has given it a hold rating and a $57 price target. Current trading in the when-issued line suggests it may open slightly below $50, a common scenario in spinoffs. Fortunately, Solstice will join the S&P 500, which mitigates concerns regarding forced selling by index holders.
Meanwhile, DuPont’s spinoff of Qnity Electronics has garnered analyst interest, with KeyBanc initiating coverage and issuing a price target of $117, indicating a 23% potential upside from current when-issued trading levels. Qnity, which will also join the S&P 500 next week, is poised for market entry.
Looking ahead, Club holdings such as Meta, Microsoft, and Starbucks are scheduled to report after the closing bell. Other notable earnings announcements include Alphabet, Chipotle, ServiceNow, Agnico-Eagle, Carvana, and eBay. Prior to the Thursday market open, earnings results from Club drug stocks Eli Lilly and Bristol Myers are also anticipated.
Subscribers to the CNBC Investing Club with Jim Cramer can expect trade alerts before any transactions are executed within the portfolio. Cramer adheres to a waiting period for executing trades after sending out alerts, ensuring careful consideration of market movements and public discourse related to any discussed stocks.
