Why Tuesday's pullback is a healthy break in the rally and how we are playing it

Published Tue, Feb 13 20242:12 PM ESTUpdated Tue, Feb 13 20242:24 PM EST

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. We're no longer recording the audio, so we can get this new written feature to members as quickly as possible. Here's Tuesday's edition. A healthy break: Stocks are down after the consumer price index came in slightly hot, leading to a delay in interest rate cut expectations. However, one piece of data shouldn't change the soft landing thesis. Instead, the dip seems like a healthy break in the rally. The market was climbing in a near-straight line for 14 weeks out of the past 15, a feat not seen since 1972. It's only natural for the market to give back some gains, or at least chop around for a little bit. We are embracing these declines and looking for opportunities. If the market pulls back, we'll swoop in with our large cash position and buy quality stocks at even cheaper prices. "I think the market is demonstrating a level of orderly retreat that shows how much people really do want to get in," added Jim Cramer. But it's not all negative out there: Nvidia and Eli Lilly are trading up in the down session. The companies are at the center of artificial intelligence and GLP-1s, the type 2 diabetes and weight loss drugs, respectively — two of the highest conviction long-term themes in the market, and that could be why dips are quickly getting snatched up there. Cramer is at a conference in Philadelphia, and people keep asking him about Eli Lilly and whether it will get reimbursement for Mounjaro and Zepbound. "I say not until heart/hypertension validation, but then yes because those cost the healthcare system too much," he said. Sector watch: Defensive groups are holding up the best on this pullback. It's not always easy owning healthcare and staples when tech stocks are ripping, but market pullbacks serve as a reminder of why it doesn't hurt to have some stable, dividend-growing companies in a diversified portfolio. As U.S. Treasury yields jump to some of their highest levels since early December, rate-sensitive stocks are getting hammered. Utilities and real estate are the two worst-performing sectors, Stocks on the move: The top performer in the portfolio happens to be Disney . It's hard to say what the positive action is in an ugly tape, but earnings last week reassured investors that real progress has been made in CEO Bob Iger's turnaround plan, most notably on the cost-cutting side. On the other hand, Stanley Black & Decker is leading the portfolio to the downside. The hand toolmaker is one of the most sensitive stocks in the portfolio to moves in interest rates, with the thinking that lower mortgage rates are necessary to recharge existing home sales, which in turn would help boost sales from do-it-yourself customers. The Pro side of Stanley's business has been strong. Later: A few notable companies reporting earnings after the bell are Airbnb , Lyft , MGM Resorts , Robinhood , and Zillow . On Wednesday, we'll hear from Martin Marietta Materials , Generac , CME Group , and Barrick Gold . (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. 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.

Founder and C.E.O. of NVIDIA Jensen Huang speaks during the New York Times annual DealBook summit on November 29, 2023 in New York City.

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