Every weekday, the CNBC Investing Club with Jim Cramer does a live “morning session” at 10:20am ET. Here’s a recap of Friday’s highlights. Banks Could Benefit From Bigger Rate Hike Eli Lilly’s Quarter Saw Mistakes, New Drugs Quick Mentions: STZ, AMZN, MRVL 1. Banks Could Benefit From Bigger Rate Hike rates Nonfarm payrolls rose 528,000 in July and the unemployment rate fell to 3.5%, according to the Bureau of Labor Statistics. The figures beat Dow Jones estimates of 258,000 and 3.6%, respectively, with the latter now back to its pre-pandemic level and tied for the lowest unemployment rate since 1969. The Treasury yield at 10 years rose and shares fell after the release. The hot labor market and still-high inflation suggest the Federal Reserve has more work to do, depending on where data comes in over the next six weeks. Therefore, the market now sees a third consecutive central bank interest rate hike of 75 basis points in September, more aggressive than the 50 basis points that had been expected before the jobs number. There is no Fed meeting scheduled for August. Another 75 basis point hike by the Fed, while a potential drag on the global stock market, would be great for banks because they could charge more in loans and “perhaps the strong labor market leads to fewer loan defaults in the than expected,” said Jeff Marks, the Club’s director of portfolio analysis. “I think it’s kind of like the total nirvana situation.” We wouldn’t be surprised to see Wells Fargo (WFC), one of our biggest holdings in the club, go higher. If it gets to $50 a share, we’d probably let go of some shares. Remember, we’ve been saying lately don’t be greedy and take profits when you can on bounces, because this year’s bear market has taught us that anything can happen. 2. Eli Lilly’s quarter saw mistakes, new drugs We think investors were wrongly focused on Eli Lilly’s ( LLY ) deficits after the company reported its latest quarterly results before the opening bell on Thursday . We acknowledge that the company missed estimates and cut its full-year forecast. However, the topics they discussed were explainable; for example, there were headwinds of change and a new accounting practice. There was nothing to shake our faith in the underlying business. The focus should be on Lilly’s new type 2 diabetes drug, Mounjaro, which appears to be doing exceptionally well. The company said it is seeing a high volume of new customers coming to the drug class. This means that demand for Mounjaro is not cannibalizing demand for Trulicity, another type 2 diabetes drug, but is instead taking market share from competitors. We also learned that the Food and Drug Administration (FDA) accepted Lilly’s Alzheimer’s treatment drug for review under its accelerated approval pathway. We trimmed our position in LLY a couple of times to $330, and it’s been down since then. But before we improve our score back to a 1, we’re asking ourselves: What is the right price to buy LLY? Do drugs have any visibility when people find out about them? What does the economy do? 3. Quick Mentions: STZ, AMZN, MRVL We are looking to buy more shares of Constellation Brands (STZ) if the economy picks up, as people tend to exit more when the portfolio is full. However, if growth continues to slow, we like our position in Constellation Brands, home of Mexican beers Corona, Modelo and Pacifico, as a recession-proof play. Despite higher prices due to inflation and slowing economic growth, people are still going out after being locked up during the height of the Covid pandemic. And Corona, Modelo and Pacifico beers are popular in the summer. Amazon ( AMZN ) is acquiring iRobot for $1.7 billion, the companies announced Friday. We think Amazon’s purchase of the Roomba maker makes sense, especially given that the robots would pair well with Alexa, Amazon’s virtual assistant offering, and the connected home concept. The e-commerce and cloud giant appears to be making a number of deals, including the recent deal to buy primary healthcare provider One Medical. Regarding Marvell Technology (MRVL), an Investing Club member recently asked us how long our investment horizon is. We believe MRVL is a multi-year story due to advances in data infrastructure markets such as cloud, 5G and automotive connectivity. (Jim Cramer’s Charitable Trust is long AMZN, LLY, STZ, MRVL, WFC . See a full list of stocks here.) 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 discussed a stock on CNBC TV, wait 72 hours after issuing the trade alert before executing the trade. INFORMATION ON THE ALTERNATE INVESTMENT CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, WITH OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTOR CLUB. NO SPECIFIC RESULTS OR BENEFITS ARE GUARANTEED.
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