4 takeaways from the Investing Clubs Morning Meeting on Wednesday
Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Wednesday’s key moments: We’re cautiously watching bond yields Meme mania could be a sign of froth in the Nasdaq We trimmed two Club stocks: DHR, LIN Costco remains best retail stock 1. We’re cautiously watching bond yields Bond yields are starting to creep up again, with the 2-year Treasury over 3.35% on Wednesday, marking its highest level since the stock market’s recent bottom in mid-June. The benchmark 10-year Treasury yield was up to more than 2.9%. Higher bond yields, which move in the opposite direction of bond prices, tend to hurt growth stocks, many of which are tech names. When yields spiked earlier this year, stocks certainly paid the price. That’s because higher yields and interest rates make the promise of future earnings less valuable, and they also make it more expensive to borrow to fuel growth. In March, we explored the ways rates affect equity valuations . The tech-heavy Nasdaq was the big loser Wednesday, down roughly 1.3%. The S & P 500 and the Dow Jones Industrial Average were both down less than 1%, respectively. We’re being cautious and carefully monitoring bond yields for any signs that the stock market could get weaker again. Since the mid-June low, the S & P 500 — even with Wednesday’s decline — has gained 17%. However, the index was still down more than 10% year to date. 2. Meme mania could be a sign of froth in the Nasdaq The meme stock resurgence in August could be signaling froth in a market, which has moved quickly higher of late. Regardless of the exchange these stocks trade on, the frenzy around them tends to hurt the Nasdaq. Shares of Bed Bath & Beyond (BBBY) were up about 20% on Wednesday, one day after closing up 29%. Boosted by Reddit traders , the stock at one point Tuesday was 70% higher and has surged nearly 300% since August 4. AMTD Digital (HKD), a Hong Kong-based fintech firm, skyrocketed in early August, with shares up 2,300% since its IPO price of $7.80 on last month. Around $189 per share on Wednesday, AMTD Digital did, however, trade as high as $2,555.30 on Aug. 2. That was a whopping 32,656% higher than July’s offer price. The recent flurry of activity in meme stocks is reminiscent of the meme stock craze in 2021, which saw GameStop (GME) stock pushed to stratospheric heights as traders on Reddit’s WallStreetBets forum piled into the stock and squeezed out short selling hedge funds. Like what happened then, we are concerned that the Nasdaq could take a hit once the meme stock craze peaks. The Nasdaq is susceptible to volatility and likely will see some declines, which could impact Club names such as Apple (AAPL) and Amazon (AMZN), which both remain great stocks. Jim Cramer warned investors on Tuesday’s “Mad Money” to swap speculative plays, including meme stocks , for boring, stable plays, and we’re echoing that advice for Club members. 3. We trimmed two Club stocks: DHR, LIN While there’s no change in our thesis for Danaher (DHR), we sold some shares after the stock’s recent run simply because we have a large position in the stock and are looking to tighten our portfolio. We also took some shares off our Linde (LIN) position. While it’s had a nice run over the last couple of weeks, we are wary of how a worsening economic outlook in Europe could hurt the company. Jim said that if the Club names see a dip in the market, perhaps 1% to 3%, he would consider redeploying the capital raised from these sales. 4. Costco remains best retail stock Retail giants are continuing to report earnings this week, with Lowe’s (LOW) seeing a mixed quarter while Target (TGT) missed Wall Street expectations on earnings . We still recommend that investors pick up shares of Costco (COST) if they want to be in a well-run retail stock, though Jim also thinks Lowe’s and Home Depot (HD) have good prospects. Costco has not reported supply chain and inventory challenges, and has a successful pricing strategy , boosting our confidence in the company and its ability to continue weathering economic headwinds. (Jim Cramer’s Charitable Trust is long AAPL, AMZN, COST, DHR, LIN. See here for a full list of the stocks.) 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. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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