Every weekday, Jim Cramer’s CNBC Investment Club releases the Homestretch, a practical afternoon update to coincide with the last hour of trading on Wall Street. Stocks are ending the week on another tough note, with the S&P 500 index headed for its fourth straight week of declines. Friday’s market decline widened the S&P 500’s decline to about 6% from its January 27 closing high. For the year, the index has fallen more than 4%. Oil remained a key topic, with WTI crude and Brent crude both up about 1%. But trends in bond yields may be a bigger focus on Friday, with the 10-year Treasury yield rising about 10 basis points to 4.38%. Concerns over a spike in oil-driven inflation have led to discussions of the possibility of raising interest rates rather than cutting them by the end of the year, the highest level since July last year. The energy sector was the best-performing sector, rising about 4%, taking its growth rate to 33% this year. The financial industry was able to squeeze out a small profit as concerns about private credit eased. New rules loosening capital requirements could also provide a long-term boost for banks. Goldman Sachs and Wells Fargo both rose 4% in a tough week, while Capital One was almost flat. What led to the decline were daily necessities. Costco and Procter & Gamble are two of the mainstays of the portfolio, and both stocks are down about 3% this week. While this defensive and economically resilient group would be expected to withstand an economic slowdown, rising input costs in an inflationary environment will weigh on sectors, especially those that do not have the pricing power to offset such pressures. Also, when the 10-year bond yields well above 4%, the dividend doesn’t look all that great. Our discipline is to nibble on stocks when the market is this low and the S&P 500 Short Range Oscillator is this low, but our trading restrictions prevent us from adding to some positions in our portfolio. We like Goldman Sachs, Boeing, and Cardinal Health on the downside, but we can’t keep buying them every day. Two more opportunities we’re interested in are Alphabet and Honeywell. We have talked several times about our plans to start Alphabet and recently purchased stock last Friday. The rating for Honeywell will be raised to ‘1’. The stock has been falling for most of this week after CEO Bimal Kapur said at a conference that first-quarter revenue would be weak. The problem was the turmoil in the Middle East. The company is unable to ship products to some customers in the region due to the war. But Mr. Kapur said these were timing issues and would not affect the company’s full-year forecasts, which he said were “on track pretty well.” Another reason we like Honeywell in a market that is struggling to find its footing is because Honeywell has a catalyst. That is the upcoming separation from the aerospace and automation businesses. Honeywell is scheduled to hold an investor day for its aerospace division in early June, and stock prices are expected to rise as the spin date approaches. The company is considering buying back some of the shares it sold in early February at more than $10 above its current price. Next week will be quiet aside from war monitoring, with no portfolio companies scheduled to report. It’s a relatively quiet time for corporate news as companies finish their first quarters over the next two weeks. One of the notable earnings announcements will be Jefferies’ March 25th earnings announcement. It is typically released several weeks earlier than major banks such as JPMorgan and Goldman Sachs, giving you an early look at investment banking performance over the same period. Economic indicators are also quite light. Typically, we weigh what companies say more than what the Federal Reserve says, but several officials are scheduled to speak, and what they say about their policy outlook could influence bonds. (See here for a complete list of Jim Cramer Charitable Trust stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
