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The Fed strikes a cautious tone. Here’s why the stock market didn’t seem to care
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. Market pop: Wall Street was able to hold onto strong gains Wednesday despite the Federal Reserve signaling just one interest rate cut this year, based on the median dot plot projection. That, of course, could shift if the data changes. The Fed left rates unchanged following its two-day June meeting, as expected. The S & P 500 and Nasdaq hit new all-time highs following a cooler-than-expected flat consumer price index for May. Excluding shelter, which remained stubbornly high, we saw a month-over-month decline of 0.2%, which was encouraging. During his post-meeting news conference Wednesday afternoon, Fed Chairman Jerome Powell acknowledged progress on inflation but said it remains too high. Powell stressed that rate decisions are data-dependent and not preplanned. However, with Walmart and Target also cutting prices on thousands of items, future inflation readings may continue to go Powell’s way. Dow drags: The Dow barely budged Wednesday. While closely followed, the 30-stock average is not a good barometer of the broader market because it’s price-weighted. The S & P 500 is market-cap-weighted. The Dow also does not have the growth tech appeal of the Nasdaq. Some notable laggards in the Dow were Nike , Salesforce , Chevron , Boeing , Verizon , Procter & Gamble , and Johnson & Johnson . Some of these declines can easily be explained by the sentiment in the market when it anticipates rate cuts. Tech, real estate, and more economically sensitive stocks tend to outperform when the market thinks a soft economic landing is coming, while more defensive areas like staples, utilities, and health care take a back seat. “Away from the portfolio I think that Johnson & Johnson is beginning to get some real adherence to its talc settlement; it could win over enough plaintiffs to get it okayed,” Jim Cramer said. “It is risky —might even want to do it with calls out a couple of months. But I think it is worth $10 to the stock.” Up next: Broadcom is the key earnings report of the night, not just because it’s in the portfolio. The quarter and outlook from its artificial intelligence business will give us another read into how ferocious the investment in this new technology is. Oracle ‘s quarter and commentary painted a very robust picture of cloud spending — explaining why the group caught fire once again on Wednesday. “The company that may be most analogous to Broadcom’s non-AI business is Skyworks Solutions . It’s very much levered to traditional handset (smartphones) business which happens to be the part of Broadcom that’s very slow. The action in SWKS is very constructive for AVGO,” Cramer said. (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.
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.
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