Market moves after the Fed rate cut — plus, two price target hikes on big-name stocks
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. Markets: The S & P 500 flipped between positive and negative Wednesday afternoon after Federal Reserve Chairman Jerome Powell said a December interest rate cut was not a foregone conclusion. Powell’s comments came during his post-Fed meeting news conference and after central bankers decided to reduce rates by a quarter-point for the second time this year. There were two dissenters: Fed Gov. Stephen Miran voted for a half-point cut, while Kansas City Fed President Jeffrey Schmid voted for no change. Wednesday’s policy statement also announced that the process of reducing the amount of bonds the Fed holds on its balance sheet will end in December. Powell said the Fed is committed to reducing inflation to 2%. Before the Fed decision, the S & P 500 rose to another all-time intraday high. Price targets: Semiconductor stocks continued higher as demand for generative artificial intelligence applications accelerates and visibility into spending over the next few years improves. These tailwinds have fueled strong rallies in Nvidia and Broadcom this week, with Nvidia up about 11% and Broadcom up roughly 7% over the period. Both stocks hit record highs Wednesday and have grown into the two largest positions in the Club’s portfolio. Nvidia on Wednesday eclipsed a $5 trillion market cap less than four months after going above $4 trillion. With quarterly earnings from hyperscalers Meta Platforms , Microsoft, Amazon , and Alphabet on the horizon, investors are about to receive another important data point on the appetite for AI capital investments. We expect each firm to either maintain or increase its AI-related capital spending outlook. That’s why we’re hiking our price targets on Broadcom and Nvidia. We’re raising Broadcom’s price target to $415 per share from $350 and Nvidia’s to $225 from $200. If one of the hyperscalers breaks rank, we will adjust accordingly. There’s no doubt about it: the AI arms race is heating up, and these companies don’t want to get left behind. Earnings: Boeing shares fell more than 4% after the company recorded a $4.9 billion non-cash charge during the third quarter. Management cited additional delays of its long-awaited 777X wide-body plane. Although the market knew a charge was coming, the figure was about $900 million more than what analysts had anticipated. Still, there’s plenty to like about the quarter. Not only did free cash flow go positive for the first time since the fourth quarter of 2023, but the company is also ramping up production of its 737 aircraft. We would be buyers on Wednesday’s decline if it weren’t for our trading restrictions. Spins: Honeywell completes its spinoff of Solstice Advanced Materials on Thursday. Solstice will trade under the ticker “SOLS.” Honeywell shareholders of record as of Oct. 17 will receive one share of Solstice for every four shares of Honeywell owned. There hasn’t been a lot of analyst coverage on Solstice yet. So far, BMO Capital Markets started Solstice with an outperform rating and a $70 price target, while Vertical Research gave it a hold and $57 price target. Current trading in the when-issued line has it slightly below $50. The when-issue line gives investors an idea of where the stock will open when it begins regular-way trading. In our Solstice deep dive earlier this month, we said there could be volatility out of the gate due to shareholders selling it to buy more of parent Honeywell. That dynamic is typical among spinoffs. Thankfully, the S & P Dow Jones announced Monday that Solstice will join the S & P 500, which means there won’t be forced selling by index holders. DuPont’s spinoff of Qnity Electronics continues to get love from analysts. Late Tuesday, analysts at KeyBanc initiated coverage on Qnity, which will trade under the ticker “Q” next week. KeyBanc put a $117 price target on the stock, representing about a 23% upside from where the when-issued line currently trades. Here’s our deep dive on Qnity, which will also join the S & P 500 next Monday. Up next: Club holdings Meta, Microsoft, and Starbucks will report after the closing bell. Outside of the portfolio, Alphabet, Chipotle, ServiceNow, Agnico-Eagle, Carvana , and eBay are slated to release results, too. Before Thursday’s open, we get earnings from Club drug stocks Eli Lilly and Bristol Myers . (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. 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