The Dow jumps as the AI trade wobbles. Plus, a portfolio name goes on the M&A hunt
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. It’s a mixed day on Wall Street. The S & P 500 and Dow Jones Industrial Average are higher, while the tech-heavy Nasdaq Composite is headed for its fifth straight day of declines. The Dow was the clear outperformer, up more than 500 points, or 1.1%, following a string of upbeat earnings reports from blue-chip companies unrelated to the data center. The S & P 500 was up about 0.25%. It helped that oil fell meaningfully for the second day in a row, pulling down interest rates. Shares of Coca-Cola and paint maker Sherwin-Williams — both members of the Dow — soared after the companies posted top and bottom line beats. Club name and Dow constituent Boeing also rallied on encouraging second-quarter results, highlighted by stronger-than-expected free cash flow. We upgraded Boeing in response. It was a different story for the Nasdaq. Some of the biggest gainers this year were the worst performers on Tuesday, with stocks like Sandisk , Dell , Micron , Western digital , Applied Materials and AMD all falling somewhere between 7% to 15%. Club name Corning had an ugly day too, dropping roughly 15% despite the company’s reported earnings that beat analyst estimates. The sharp declines in once-hot AI names are a reminder of the risks that come with parabolic moves once momentum begins to fade. Conversely, the gains in many non-AI stocks appear to be driven more by sentiment than fundamentals, which is one reason we trimmed our Procter & Gamble position into strength on Tuesday. P & G reports on Wednesday morning, and we wanted to protect against the company issuing conservative outlook at the start of its fiscal 2027. Software stocks were also having a solid session on Tuesday. We’ve increasingly seen investors rotate into the beaten-up group on days when the AI hardware trade is under pressure. The iShares Expanded Tech-Software Sector ETF is pacing for its third positive day in a row, while the VanEck Semiconductor ETF is on track for a fourth straight day of declines. Dover announced a small acquisition Tuesday, acquiring the privately held Cloeren Incorporated for an undisclosed amount . Cloeren is a global leader in the production of high-performance, custom-designed machines used to make plastic products. This is a typical Dover deal, buying a niche company to complement its existing portfolio and expand its capabilities. But from our perspective, the deal doesn’t move the needle to alter our view on the stock. We’ve been waiting for management to get more aggressive on M & A, but we prefer larger, accretive deals that boost its exposure to secular growing markets. An execution misstep hurt Dover’s second-quarter results last week, prompting us to downgrade our rating to a 3, meaning sell into strength. It’s a big night of earnings for the wobbly AI trade, with Seagate Technology , KLA Corporation and Bloom Energy scheduled to report. Other companies reporting are Visa , Ford Motor and Cheesecake Factory . In P & G’s earnings report Wednesday morning, we’ll look to see if the soap and toothpaste maker can accelerate organic sales growth in its upcoming fiscal year. Other companies scheduled to report are SoFi , Boston Scientific , Vertiv Holdings , Amphenol , Flex and Humana . There are no major economic data releases on Wednesday, but it is Fed day. While the Federal Reserve’s policymaking arm is widely expected to leave interest rates unchanged, a growing number of voices believe the central bank could hike interest rates as soon as September. (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.
