10 things we’re watching in the stock market Friday ahead of the long weekend

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The Club’s top 10 things to watch Friday, May 26

1. The Dow, the S&P 500 and the Nasdaq are set for a modestly higher open Friday as the latest increases in consumer spending and durable goods beat estimates. The Fed’s favorite inflation gauge also came in stronger the expected.

2. That’s not a great combination of data for those who think the Fed should pause its interest rate hikes. Market odds on a hike in June, as measured by the CME’s FedWatch tool, just jumped to over 55%. Looking out to the July meeting: the odds of another hike are now more than 25%.

3. Still no debt ceiling deal with six days until the Treasury’s June 1 default deadline. One Republican negotiator said, “We’re at a sensitive phase, with sensitive issues that remain.” In a commentary this week, we lined up the X-dates for default in 2023 and 2011 in one chart and looked at the market before and after. The risk to stocks was plain to see.

  • A programming reminder: The Club’s Morning Meeting will be held, as scheduled, at 10:20 a.m. ET. However, with the long Memorial Day weekend in front of us, there will be no Homestretch on Friday. The markets are closed Monday.

4. Another day, another semiconductor stock surging. Friday, a day after Club name Nvidia (NVDA) huge jump, Marvell Technology (MRVL) was up nearly 18%. Quarterly top- and bottom-line beats.  Marvell’s CEO is “forecasting sequential revenue growth” in the company’s current quarter with revenue from AI at least doubling in its current fiscal year. Morgan Stanley boosts MRVL price target to $55 per share from $45.

5. Club holding Costco (COST) delivered a solid earnings report for its fiscal 2023 third quarter. Sales were a touch softer than expected, but gross margin expansion was a positive surprise and bucked a negative trend of shrinking profits at other retailers this earnings season.

6. UBS cut its price target on COST to $560 per share from $575. However, the analysts noted strong traffic and membership retention and kept their buy rating.

7. Gap (GPS) gains 8% in early trading despite quarterly net losses and declining sales. However, like COST, Gap’s had a big improvement in its margins, crediting reduced promotions and lower air freight expenses, and that’s what investors are buying. In apparel retail, the Club owns off-price stalwart TJX Companies (TJX) and specialty chain Foot Locker (FL).

8. On the flip side of Gap’s move, Ulta Beauty (ULTA) sinks around 9.5% as investors choose to focus on tepid same-store sales growth instead of an overall strong quarter and a slight full-year raise.

9. Big DA Davidson price target cut on ULTA to $540 per share from $620. At the high-end of the beauty category, the Club owns Estee Lauder (EL).

10. Frenemies? Ford (F), in a surprise move, partners with U.S. electric vehicles leader Tesla (TSLA) on charging tech. Under the agreement, Ford, a distant No. 2 in EVs,  gains access to more than 12,000 Tesla Superchargers across the U.S. and Canada starting early next year. Club stock Ford gets a 2.5% pop on the news.

(See here for a full list of the stocks in Jim Cramer’s Charitable Trust)

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