Market Update: Wall Street Adjustments
Every weekday, Jim Cramer’s CNBC Investment Club shares the Homestretch, an afternoon recap that aligns with the last hour of trading on Wall Street. On this day, the markets are attempting to bounce back from a selloff experienced on Friday, with the S&P 500 rising by 0.6% and the Nasdaq gaining 1.2% during afternoon trading. While AI trading generally saw an uptick, major hyperscalers were feeling some pressure as investors speculated they might follow in Alphabet’s footsteps by utilizing the stock market for AI investment funding.
Honeywell’s shares are on a downturn after the company reaffirmed its full-year outlook and rolled out new guidance for Honeywell Technologies, which is the name left after spinning off its aerospace division. Key updates from this presentation include that the company reported solid orders in the second quarter, with a forecast for flat growth in industrial automation this year—an upgrade from previous expectations, which anticipated a low-single-digit decline. The second half of the year is looking promising for Process Automation and Technology (PA&T), although ongoing conflicts in the Middle East are affecting shipments and delaying upgrades.
Honeywell also adjusted its earnings per share (EPS) guidance by excluding its aerospace business, factoring in the impact of newly listed Quantinum, and accounting for costs related to pensions and separations. Investors can expect further insights, including new three-year financial targets, during Thursday’s investor day. On Friday, Honeywell revealed that shareholders would receive one share of Honeywell Aerospace (HONA) for every two shares of Honeywell common stock. Interestingly, in terms of Charitable Trust, the portfolio holds 195 stocks from aerospace companies.
As soon as the spin-off is finalized, Honeywell Technologies will execute a 2-for-1 reverse stock split, halving the shares in the company from 390 to 195. With so many moving parts, the total value from merging the new Honeywell Aerospace and Honeywell Technologies shares will likely not cause significant changes in market value compared to the pre-spin company. We took proactive measures by reducing our position in Honeywell a couple of weeks ago at around $232 per share. After a recent drop of 8% before the split, we are nearing a repurchase of those shares while considering elevating our rating to 1. We’ve consistently believed that sector separations can enhance shareholder value. Each situation has its nuances, but past successes with companies like Qnity Electronics, Solstice, and FedEx Freight reinforce this notion.
We’re also keeping an eye on announcements from Apple’s Worldwide Developers Conference. The long-awaited updated Siri AI was revealed just after 1:30 p.m. ET, causing Apple shares to dip to approximately $308 from a high of $317 earlier during the event. A more thorough review is scheduled for publication on Tuesday, where tech analysts will share insights. However, this drop in stock might reflect typical news reactions rather than any indication of failure. Anticipation around the new Siri has been growing since January, particularly following Apple’s multi-year collaboration with Google to incorporate Google’s Gemini into its foundational model strategy.
In addition, Vail Resorts is set to release its quarterly results after the market closes, while JM Smucker will do so beforehand on Tuesday. Used home sales for May will also be announced in the morning. The week’s more significant economic indicator comes from the Consumer Price Index (CPI) report for May, set to be released on Wednesday. Following last Friday’s robust jobs report, there are growing market concerns that the next movement in interest rates could favor an increase rather than a decrease this year. Moreover, the ongoing conflict in Iran is leading to immediate inflationary pressures, but if the war continues, there’s a heightened risk of those price increases becoming more ingrained in the broader economy.
If the CPI data exceeds expectations, the push for rate hikes from hawks will intensify, complicating the near-term outlook for stocks. For a complete list of stocks from Jim Cramer’s Charitable Trust, further resources are available. In being part of Jim Cramer’s CNBC Investment Club, members receive trade alerts prior to any trades Jim executes. After issuing a trade alert, he waits about 45 minutes before making any buy or sell decisions within his trust’s portfolio. Furthermore, if Jim discusses a stock on CNBC, a trade alert is sent out, followed by a 72-hour waiting period before any trades occur.
