What Jim Cramer is watching to see where the stock market goes next
We don’t know what we want. This week, we’ll take a look at what’s driving us forward or holding us back after the S&P 500 closed at a new high for the first time in more than two years on Friday. For example, this week we have three railroads reporting: Union Pacific, CSX Railroad and Norfolk Southern. Among them, almost all non-service parts of the US economy are covered: housing, industrial production, mining, road construction, heating and food. What number do we want from these three numbers? Do we want them to be more dovish to help the Fed lower interest rates? Or do we want them to show positive year-over-year numbers to prove the U.S. economy isn’t in for a hard landing? Or do we want them to be strong so we can tighten policy now that many central bankers are assuring us the Fed is over? I think the answer lies somewhere in the middle, with proper comparisons to avoid a crunching hard landing. While the bond market appears to be making the mistake of relying on broader data, the importance of these trajectories cannot be ignored. Maybe that’s why your forward curve is so wrong. Why is the forward curve so wrong? I think that’s a factor in big money flows, which are not sensitive to interest rate changes and don’t mind being wrong. We know from the banking crisis that followed the collapse of Silicon Valley banks nearly a year ago that banks made so many stupid investments that you can’t draw any conclusions from them. Regardless, I think equity investors will continue to focus on interest rates and the factors that influence them – if you want to understand what’s going on, we need to watch the reaction to the trajectory, whatever tells us what the market wants to see. Why is the Super Six so important? Because we have a default mechanism that keeps popping up: the return of the “Super Six,” which is my new nickname for the “Big Seven,” as Tesla reported on Wednesday that it has become disconnected from the rest of the group as electric vehicles gradually Decline until, perhaps, charging stations grow faster and become more ubiquitous. No, the default mechanism is stock in a company called ServiceNow, which reports Wednesday. ServiceNow has everything you want from a company: estimated upside, profits from generative artificial intelligence, and a leader with charming Terminator charisma. If I were prepared to consider a company to help me figure out how to be more productive, I wouldn’t want to go against CEO Bill McDermott, who I think is the primary, broad influence of this company. That’s why businesses and governments choose ServiceNow: they know they have a force multiplier on their hands and can’t be cheated. If you see ServiceNow delivering better top and bottom line numbers but disappointing results, then you know we’re back to a world where Microsoft tops $400 and Nvidia tops 50 points. That’s great for the Super Six – Google parent Alphabet, Amazon, Apple, Meta Platform, Microsoft and Nvidia. They are all club stocks. But then we’re going to see a lot of people getting worried that the Russell 2000 small-cap index isn’t rising – as if that’s been a thing for the past fifteen years. Excluding underperforming health insurance companies, the performance of health care stocks is also telling. We learned from the J.P. Morgan Healthcare Conference earlier this month that we are on the cusp of a lot of ingenuity. Abbott Laboratories will be the most important stock in the group as it covers various healthcare product lines. The company has an annoying habit of only counting when certain projects do better than expected. If it does go up, get in line to buy your favorite healthcare companies. We’ll be talking about our bullpen’s favorite sectors at the Investing Club’s monthly meeting Wednesday at noon ET. After I attended the J.P. Morgan meeting in San Francisco, we added Abbott, Amgen, Novartis and Walgreens Boots Alliance to the bullpen watch list. At least Abbott told a good story. I’m starting to dread the club-name Procter & Gamble report because CEO Jon Moeller is a one-man wrecking crew, always pointing out what’s not working within the confines of some meager positives. I wish someone told that company that you don’t need to find 10 Achilles’ heel on a call. Maybe it’s some kind of Cincinnati thing. Procter & Gamble releases quarterly results on Tuesday. Can the market move higher, led by the “Big Six” and healthcare? Of course I think so. The Fed’s Role This market prefers to be led by companies that thrive in a non-inflationary environment because it remains concerned that the Fed will change the direction of interest rates. In addition to what we already have, if I were a member of the Fed’s policymaking committee, I would be more concerned that we are starting to heat up. Just ask yourself what has happened to prices in the last year and you’ll know the answer: nothing. It’s just that inflation is slowing down, and I bet the Fed will regret having said it wouldn’t tighten policy, which was unwise in hindsight. The Power of Technology Despite this, the Super Six remains confusing. Take Apple for example. If you look back at its numerous downgrades before and after earnings reports and its recent slump, you’ll see not a single mention of its most obviously powerful product: the Vision Pro mixed reality headset, which launched on Friday and immediately sold out . Although pricing starts at $3,500. This doomed dud, launched by a company that “hadn’t innovated since Steve Jobs’ death in 2011,” turned out to be a hit. That’s because, in reality, the company is an innovation machine hidden in all the iOS mobile operating system updates that happen overnight. Vision Pro will change the way we watch entertainment and debunk the lies of a 75-inch screen 20 feet away from you. I know I hear people say they don’t want to watch football games outdoors in 20 degree weather, but you never hear anyone say they feel like they’re “there” when they’re watching a flat screen TV in their living room. Welcome to a world where you can lie back and watch or switch from ads to what you want instantly with just a tap of your thumb and forefinger. It’s no wonder that Google-owned YouTube and Netflix won’t let their products appear on Vision Pro. It’s so powerful that somehow they lose control of the audience. Surprisingly, the high price and cumbersome guidance in stores didn’t deter early adopters. I think when Apple reports its latest quarterly report on February 1st, aside from the poor performance of phones from China, adopters will speak out and give Apple something to talk about. Apple can’t save its life through hype, don’t I know? I just wanted to talk about the phone, which worked fine after being dropped from 16,000 feet with an overly flexible cabin door, but I couldn’t get a positive review out of them. I don’t think Apple will discuss the significant revenue stream the Vision Pro will generate. It’s a good story, as Vision Pro plays a small role in fending off degradation. Nothing makes the story better than a new line of phones with higher price points. I just choose Apple. Amazon and Alphabet have no problem talking about their efficiency. Meta flexes its muscles with these connected Ray-Ban glasses. Maybe it’s because I have a daughter who loves Instagram and I know how powerful their concepts are. A real pair of regular Ray-Bans looks like they have a lot more baggage than the Meta version. All Microsoft has to do is reveal the number of sales seats for its Copilot AI assistant for its Office suite to capture that seat. It’s fair to say that Kimberly Clark couldn’t stand out from the competition. In this market, boredom is unacceptable. Bottom Line So here we go – excitement coupled with a subdued bond market equals higher stocks. But only if their company’s products are new and improved as advertised. Only a Super Six could say this without it being untrue. (See here for a complete list of Jim Cramer Charitable Trust stocks.) As a subscriber to Jim Cramer’s CNBC Investing Club, you will receive trade alerts before Jim makes his trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. 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Jim Cramer on the New York Stock Exchange and the Bull Market. June 30, 2022.
Virginia Sherwood | CNBC
We don’t know what we want. This week, we’ll learn what will move us forward or hold us back. S&P 500 Index It closed at a new high on Friday for the first time in more than two years.
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