What drove the stock market last week – before and after SpaceX’s historic IPO
Wall Street took a breather on Friday after SpaceX hit its first record. The success removed a week of concern over whether the market had the will to digest the first-ever large public offering. SpaceX closed up 19% to about $161 per share for a market value of more than $2.1 trillion, making it the sixth largest public company in the US. The stock opened at $150 – above the proposed offer price of $135. It rose above $176 at one point before the AI and rocket company raised $75 billion and made CEO Elon Musk the world’s first trillionaire. A few hours before SpaceX started trading, Jim Cramer said that early signs of demand for an IPO looked promising – allaying fears in the market about whether the banks would hold on and what the Club had been protecting all week by doing incremental sales to raise our capital. “We’re over the hump,” Jim said during Friday’s morning meeting. While we prepare for the worst, SpaceX startup sent shares higher on Friday. Signs of a possible US-Iran peace deal soon certainly helped. The IS&P 500 advanced 0.5%, bringing its weekly gain to around 0.7%. The Nasdaq rose 0.3% on Friday and ended the week up 0.7%. Friday’s rally is topped by Thursday’s big comeback following Wednesday’s rally. Here’s a look at what drove the market last week, including our growing cash pile, a major supply deal between Corning and Amazon, and inflation targeting ahead of next week’s Federal Reserve rate meeting. Our money pile grew In the first visit to SpaceX, Jim warned that mega IPOs can be a storm in the stock market. An oversupply of equity can lead to investors selling their existing holdings for cash and buying shares in a hot offering. We saw some of that as the week played out. Two other mega IPOs coming down the pike are OpenAI, which filed its IPO papers last Monday, and Anthropic, which filed earlier this month. “We want the agreements to be controlled because if not, they can be a disaster,” said Jim during “Mad Money” on Thursday. Concerns like these led us to reduce several of our positions last week. Our view: Raise more capital in a downturn and protect against any volatility caused by SpaceX. We sold some Goldman Sachs and Qnity on Monday, Arm on Tuesday, and Eaton and Cardinal Health on Wednesday. Our cash position is 12% higher than normal, giving us plenty of leverage to start buying. The AI bet continued as Corning announced on Monday that Amazon will pay billions of dollars over the next few years for its fiber optics to expand its data center presence. Optical is increasingly replacing copper because it is faster and consumes less power, which is the limiting factor in computing power. The deal is a boon for Corning’s communications division, which produces communications solutions and fiber-optic cable critical to data center development. It’s one of several deals Corning has entered into, including with Nvidia last month and Meta Platforms in January. A few sessions later, Oracle had a lot of good things to say about the need for AI computing. The tech company announced plans to raise an additional $20 billion to fund the creation of AI infrastructure during the lead-up. The most important thing for us is that money does not go to hopes and dreams. Oracle has proven that funding is not a “if you build it, they will come” situation. It’s a case of “they already exist, so the faster you build, the faster you sell”. The capital increase overshadowed Oracle’s better-than-expected results, sending shares down nearly 9% on Thursday. Bad timing for Oracle shareholders, but a good week for some of our AI-related plays. Intel was our top performer, with a weekly gain of more than 25%. Bank of America upgraded its stock twice to buy on Thursday, a major gainer in earnings. Arm Holdings, which was a rocket ship, was our No. 2 for the week, jumping 11%. Nvidia was down last week and Broadcom was down less than 1%. Apple shares lost more than 5% in the week after the company announced Monday at its annual developer conference a new AI-enhanced Siri powered by Google’s Gemini. Apple has been close to a record high for the event. Inflation – hot or not Without trading AI, the market debated the results of what appears to be hotter than expected inflation data at the upcoming policy meeting of the Fed. May’s consumer price index, a broad measure of the cost of goods and services in the economy, registered its highest reading in three years. To be sure, that is not good. But Jim said he likes the numbers, saying the 4.2% year-over-year increase reflects higher oil prices driven by the Iran war. “The things that have been out there are all somehow related to Iran. … But when I look at it, I say, ‘Okay, if you end this war in two or three days … then I think you’re going to look pretty good,'” he added. Traders on Friday widely expect that the central bank will hold interest rates on target when the decision is announced on June 17. It will be the first meeting with the chairman of the Fed chosen by President Donald Trump, Kevin Warsh, in charge. Trump has made no secret of his desire for lower prices. However, since he appointed Warsh in January, talk in the market has shifted from rate cuts to rate hikes. We’ll see how Warsh threads that needle next week. (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. 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