Every weekday, the CNBC Investing Club with Jim Cramer releases Homestretch an actionable afternoon update, just in time for the final hour of Wall Street trading. (We’re no longer recording the audio, so we can get this new written feature to members as soon as possible.) Industrials Lead Decline: Stocks are down to start the week and June trading month by given some of Friday’s gains as investors worry about economic growth. The industrial sector was hit as the Institute for Supply Management’s manufacturing PMI fell 0.5 percentage points to 48.7% and contracted for the second month in a row. A reading below 50% indicates shrinkage. The data also showed a contraction in new orders and backlogs, a sign of weakening demand. Survey respondents in almost every sector were also quite weak. Recently, softening economic data, or “brown shoots”, have been viewed positively by the market. This idea works under the idea that a cooling in the economy can help tame inflation and allow the Federal Reserve to start lowering interest rates. But there has to be a balance: we don’t want to see the economy weaken too quickly. There are plenty of data coming our way this week that could shape the central bank’s thinking toward its next rate decision at the June 11-12 FOMC meeting. Healthy pullback: The AI infrastructure construction trade is getting hammered for the second session in a row. Shares of Dell, Super Micro, Vertiv and Club Eaton all fell. Utilities that meet the growing power demands of AI data centers, such as Vistra and Constellation Energy Corp, were also lower. Dell’s quarter last week kicked off the selloff, with many noting that its backlog of servers rose just over 30% over the quarter to $3.8 billion. We joke about “only” because in itself a consistent 30% growth is an impressive achievement. But Dell’s performance failed to meet the expectations, otherwise known as the “whisper number,” of top investors. As a close technology partner of Nvidia, Dell plays a critical role in the AI ecosystem, and its backlog shows the strength of demand. And Dell’s numbers not living up to the extreme hype isn’t a sign that AI spending is slowing. This is a case where expectations got ahead, creating a healthy pull that puts expectations more in line with reality. Interestingly, Nvidia is bucking the trend of these AI-build gainers, rallying more than 3% on Monday and back to its all-time high. After hearing from CEO Jensen Huang over the weekend, we’re reminded again that “the more you buy, the more you save” when it comes to its accelerated computing platform, and that the biggest beneficiary of AI is still Nvidia. Next: It’s a quiet week of corporate earnings. Bath & Body Works and Ferguson report Tuesday morning before the opening bell. (See here for a complete list of stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. MESIPERM INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR ACCEPTANCE OF ANY INFORMATION PROVIDED IN CONNECTION WITH INVESTOR CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Truck transmissions sit on pallets at Eaton Corp. manufacturing facility in San Luis Potosi, Mexico, on Wednesday, May 27, 2020.
Mauricio Palos Bloomberg | Getty Images
Every weekday, the CNBC Investing Club with Jim Cramer releases Homestretch an actionable afternoon update, just in time for the final hour of Wall Street trading. (We’re no longer recording the audio, so we can get this new written feature out to members as soon as possible.)
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