Every weekday, the CNBC Investing Club with Jim Cramer presents the Homestretch — a timely afternoon update just before the final trading hour on Wall Street.
Market Overview
Stocks showcased a robust recovery on Monday, rebounding from initial selling pressure triggered by Moody’s downgrade of the U.S. credit rating. Investors quickly seized the opportunity to buy on dips, anticipating a less severe market reaction compared to previous downgrades. The S&P 500 started the day approximately 1% lower but narrowed its losses to about 0.1% around 2:30 p.m. ET. Additionally, bonds recovered from their morning lows; the yield on the 10-year Treasury note, which peaked at 4.56% at around 9 a.m., has since decreased to roughly 4.48%.
Settlement Developments for Capital One
Capital One is making strides in a significant legal case. On Friday, the bank agreed to pay $425 million in restitution to resolve a lawsuit regarding its savings accounts. This preliminary settlement, pending judicial approval, was submitted in a U.S. federal court in Alexandria, Virginia. The class-action lawsuit claims that Capital One froze interest rates for 360 Savings depositors at 0.3%, while not disclosing a higher-yielding 360 Performance Savings account that offered over 4% interest. Despite the settlement, Capital One has not confessed to any wrongdoing.
Market Reaction to Capital One’s Acquisition
Capital One is also facing a similar lawsuit from New York, but shares rose by 1% on Monday, now trading at around $199. Investor sentiment improved over the weekend following the completion of Capital One’s $35 billion acquisition of Discover Financial, concluding a 15-month process. Jim Cramer labeled Capital One as his “favorite stock,” citing the merger as a major reason for investing in the company earlier this year. Management projects that the merger will yield an annual $2.7 billion in “synergies” by 2027, which will include operational and marketing expense reductions. The bank also plans to bolster Discover’s payment network, competing with major players like Mastercard, Visa, and American Express.
Investment Banking Insights
In the investment banking sector, Goldman Sachs and Morgan Stanley experienced a downturn shortly after 11 a.m. ET, following comments from JPMorgan during its investor day. Goldman’s shares recovered some losses as the session continued. JPMorgan suggested that investment banking fees for the second quarter might drop by mid-teen percentages year-over-year. However, no surprise emerged from this information given April’s tariff-related uncertainties. Recent improvements in the IPO and M&A markets have fostered optimism for the second half, with heightened market volatility leading to increased trading activity. JPMorgan forecasts second-quarter trading revenue to rise by mid-to-high single digits annually.
Upcoming Earnings Reports
No major earnings reports are set for today following the market’s close. However, Home Depot is scheduled to report before the opening on Tuesday, and analysts at Evercore ISI recently added the stock to their “tactical outperform list.” They believe that Home Depot shares could rise if management confirms its outlook for a 2% decline in earnings per share and 1% growth in comparable sales, while indicating that sales trends are expected to improve throughout the year.
Other Notable Companies and Economic Data
Other firms scheduled to report include Viking Holdings and Amer Sports, which owns Wilson. Notably, there are no significant economic data releases planned for Tuesday.
Investment Club Details
Subscribers to the CNBC Investing Club with Jim Cramer will receive trade alerts prior to any trades Jim executes. He waits 45 minutes post-alert to act on his charitable trust’s portfolio. For stocks discussed on CNBC, Jim holds off for 72 hours after issuing a trade alert before executing the trade.
Legal Disclaimer: The information provided in connection with the Investing Club is governed by our terms, conditions, and privacy policy. No fiduciary duty or obligation arises from the information provided, and no specific profit outcome is guaranteed.
