Every weekday, the CNBC Investing Club with Jim Cramer updates members with the “Homestretch,” providing actionable insights just before the final trading hour on Wall Street.
In recent market activity, stocks are on a rebound following a significant selloff experienced on Tuesday. This resurgence, however, is not confined to AI-related firms; it represents a broader market movement influenced by key economic data releases. The ADP payrolls report indicated that private employers added 42,000 jobs in October, a figure that far exceeded the Dow Jones consensus estimate of 22,000. This report marks a positive shift from September’s job loss, alleviating concerns about a deteriorating labor market. While the ADP data doesn’t always match the forthcoming non-farm payrolls numbers, it stands as a vital indicator given the ongoing government shutdown.
Additionally, the October ISM Services Index came out stronger than anticipated, reflecting growth from September. The Prices Index, which gauges costs for goods and services in the services sector, reached 70% for the first time since October 2022, indicating rising prices. This influx of positive economic indicators likely contributed to the yield on the 10-Year Treasury note rising to approximately 4.15%.
Further market momentum was fueled by questions posed by Supreme Court justices regarding the legality of former President Donald Trump’s tariff policy. A potential rollback of these tariffs could invigorate businesses facing squeezed margins due to increased import costs, notably in the apparel and retail sectors, and companies like Stanley Black & Decker saw positive movement on Wednesday as a result.
In corporate developments, DuPont’s recent spinoff of Qnity Electronics has turned favorable for investors. The shares of the new DuPont have surged nearly 16% over the past three trading sessions, closing just under $40 on Wednesday, achieving a year-to-date increase of around 24%, significantly outperforming the S&P 500’s 16% return. While Qnity shares experienced a decline of around 4% on Wednesday, seen as typical post-spin volatility, DuPont’s impressive gains stem from a market reevaluation of its valuation, which had been deemed overly discounted relative to its multi-industry peers prior to the spinoff.
Bloomberg reports a 12-month consensus price target of about $44 for the new DuPont, suggesting further valuation upside. Yet, in light of the recent price escalation and upcoming earnings report on Thursday morning, the Club has decided to downgrade DuPont to a rating of 2, indicating that future purchases may be considered only on a pullback. The new price target reflects an approximate 15% upside from Tuesday’s closing price.
Looking ahead, several significant earnings reports are expected after Wednesday’s market close from companies including Robinhood, AppLovin, Dutch Bros, Arm Holdings, Qualcomm, Figma, Snap, DoorDash, and Lyft. Club holdings such as DuPont and Solstice Advanced Materials, which recently spun off from Honeywell, will report results Thursday morning, while Qnity is scheduled for a business update in the evening. Texas Roadhouse is also set to release its earnings after the market closes on Thursday.
For subscribers of the CNBC Investing Club, timely trade alerts are provided before any trading action is taken. Jim Cramer adheres to a specific waiting period before executing trades following the dissemination of these alerts. All information provided is subject to the Investment Club’s terms and conditions and does not constitute specific investment advice or guarantee any outcomes.
