Lost in the tech stock rotation are bullish calls for major banks

Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch—an actionable afternoon update just in time for the final hour of trading on Wall Street. Market slide: The S&P 500 gave up early gains and fell throughout Tuesday afternoon, led by Big Tech stocks. Ahead of Wednesday afternoon’s post-Federal Reserve press conference, where central bank Governor Jerome Powell is expected to signal an imminent rate cut, the market continues to sell off shares of companies that don’t need lower rates to beat higher rates. Instead, investors continue to buy shares of companies that have much better prospects in a lower interest rate environment. In an example of this dynamic, club name Nvidia doesn’t need a rate cut to spur demand for its artificial intelligence GPUs, but if lower mortgage rates re-stimulate sales of older homes in need of repairs, lower rates could A windfall for Stanley Black & Decker. Nvidia shares fell 5% on Tuesday. Also in the portfolio, Stanley Black & Decker rose more than 9% in a profit-driven rally, extending last week’s upward momentum. We don’t know how long this rotation will last, but that’s what’s happening now. Bank stocks shine: Morgan Stanley analyst Betsy Graseck’s bullish comments on big bank stocks come amid an earlier shakeout of all earnings reports and another tech sell-off lost its way. We read Grasek carefully because of her previous big calls. Back in January, Grasek and her team upgraded the big banks to “attractive” and upgraded Citigroup, Goldman Sachs and Bank of America to buy-equivalent overweight. At the time, Morgan Stanley already had overweight ratings on club names Wells Fargo and JPMorgan Chase. This is a good decision. Now, Grasek has again raised her price targets on nearly every bank she covers following second-quarter earnings. In a review of the quarter, she found that the capital markets rebound was just entering its second round, with excess capital supporting higher buybacks next year and net interest income starting to take a toll on a handful of banks. Glaske believes that over the long term, banks favor her “bullish view” of lower expected credit losses. Next up: It’s a big earnings night, with club names Microsoft, Advanced Micro Devices and Starbucks scheduled to report. Other companies to watch include Arista Networks, Pinterest, First Solar, Caesars Entertainment and Electronics Arts. We’ll look at gains from club stocks GE Healthcare and DuPont ahead of Wednesday’s open. Boeing Co., Norwegian Cruise Line, Mastercard, Humana, Trane Technologies and Kraft Heinz are also set to release reports. Club stock Meta Platforms reported earnings after the close on Wednesday. (See here for a complete list of stocks in the Jim Cramer Charitable Trust.) 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. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation is created or created by any information you receive in connection with the Investment Club. No specific results or profits are guaranteed.

Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch—an actionable afternoon update just in time for the final hour of trading on Wall Street.

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