3 forces drove another historic – yet volatile – week for the S&P 500
It was another week under the thumb of the Iran war. The S&P 500 and Nasdaq each ended Friday at record highs after applauding developments in the Middle East all week. Oil prices also rose sharply as Iran and the US imposed restrictions on the Strait of Hormuz, a key oil shipping route. Still, record gains ensured another good week for the S & P 500 and Nasdaq, which rose 0.6% and 1.5%, respectively. The Iran war was not my only focus. Corporate earnings and the divergence between hardware and software stocks also caught our attention. Here’s a breakdown of the three themes that have rocked Wall Street over the past five sessions. Headlines With little progress in the peace talks over the weekend, Monday was a low-key day for detentions. Tuesday was not much better after President Donald Trump told CNBC that the US is “ready” to bomb Iran if a deal is not made by Wednesday’s ceasefire deadline. The situation turned on Wednesday when the S & P 500 and Nasdaq closed at records after Trump announced the extension of the ceasefire for two weeks. Just as the market caught up, another reversal came on Thursday. Stocks came under pressure, and oil prices rose, when Trump said he had ordered the US Navy to “shoot and kill any boat” laying mines in the Strait of Hormuz. Still, stocks managed to finish the week strong. Investors are betting that peace talks will resume soon. The IS & P 500 and Nasdaq on Friday rose 0.8% and 1.63%, respectively. to their new height. We will have to see if the peace talks happen this weekend. US special envoy Steve Witkoff and Jared Kushner traveled to Pakistan hoping to meet their Iranian counterparts. All the events of the war reminded us of one thing: Don’t make a big deal out of the Mideast conflict alone. There is too much uncertainty and volatility not based on the fundamentals of a stock. We have been saying this since the war started on Feb. 28. Dichotomy in tech Buy hardware, sell software trade is back. Investors bought technology stocks seen as supporting the creation of an AI infrastructure and dumped those seen as threatening its adoption. Big winners of the week? Chip shares. The group rallied for its 18th session in a row on Friday supported by an earnings report from Intel. Good news for us as investors in Nvidia, Broadcom, and more recently, Arm. On Monday, we started an Arm position in the belief that the stock will be a winner in the era of AI agents. Shares are up about 33% since then. For the week, Nvidia gained 3.2% and closed Friday at a record high, while Broadcom rose nearly 4%. On Friday, we also booked a profit in Broadcom, entering the stock that has benefited from the stock’s recent parabolic advance. Broadcom ended the week on top. On the other side of the trade was software. The group was downgraded after gains from IBM and ServiceNow. Investors were disappointed that IBM did not raise guidance after beating on the top and bottom lines. ServiceNow’s margins were a concern, as was subscription revenue growth, which was hampered by the war. Software stocks fell as a result, meaning a bad Thursday for Salesforce and Microsoft. For the week, Salesforce lost 2%, while Microsoft rose 0.4%. Our cyber security names, Palo Alto Networks and CrowdStrike, were negatively grouped in the sale, but each managed to gain about 6% for the week. Earnings IBM and ServiceNow weren’t the only quarterly gains on our radar. GE Vernova and Dover showed us the value of the AI architecture, while aerospace was key to reports from Boeing and Honeywell. The insatiable demand for energy fueling the AI boom was the financial windfall of GE Vernova and Dover. Shares of GE Vernova rose nearly 14% on Wednesday’s earnings. The Club took the price of the GE Vernova up to $1,300 from $1,000. Orders for its heavy-duty natural gas engines aren’t slowing down anytime soon as hyperscalers pour billions into data center construction. “This might be a classic,” Jim said at the Wednesday Morning Meeting. Dover stock jumped nearly 6% in Thursday’s results. It was an impressive quarter that reminded us why the company is part of the portfolio. We raised our PT to $245 from $230. The order growth was amazing. Dover is able to ride the AI wave because it plays a role in liquid cooling of data centers. GE Vernova closed Friday at a record high. Dover ended the week about 3% off its record for Feb. 20. Investors have jumped into earnings worried about Boeing and its aerospace peers in the belief that war-induced jet fuel prices will hurt demand and profits. That proved to be untrue for our Boeing, which reported better-than-expected earnings on Wednesday. The stock rose 5.5% at the time of the result. It was also a step in the right direction for change under Boeing CEO Kelly Ortberg. Shares of Honeywell fell on Thursday’s release as disruptions in the Middle East at the aerospace division hurt sales. But the quarter was more encouraging than the market had put it. The most significant development was Honeywell agreeing to sell its Warehouse and Workflow Solutions unit and set June 29 as the date to spin off its aerospace business into a separate company. Automation will focus on the second remaining company. (See here for a full list of stocks from 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 stock in his charity portfolio. When Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade warning before making a trade. THE PRIVATE INFORMATION OF THE BURNING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AND OUR PRIVACY POLICY. 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