The record-breaking week in the stock market that could have gone very badly

CNBC

11 hours ago

It was another exciting week on Wall Street as the S & P 500 and Nasdaq each closed Friday at new record highs. Incredible as that was, this week could have easily gone another way. Last Saturday, the world learned that the U.S. had entered the Israel-Iran conflict, dropping several massive bunker busters on Fordo, Iran's underground nuclear facility buried under a mountain, and bombing two other sites, Isfahan and Natanz. While fear of further escalation and a prolonged war involving the U.S. was palpable last weekend, the market on Monday shrugged, betting on the notion that the conflict would not result in systemic risk or slow the U.S. economy and hamper corporate earnings much, if at all. As risky as any military action is given the potential to spiral out of control, they tend not to impact the market for long, unless signs appear that it will start impacting growth and inflation. That has not yet happened. We did see energy prices surge in the week before last Saturday's bombings, but they quickly came back down. West Texas Intermediate crude plunged on Monday and Tuesday. While rising modestly in each subsequent session, WTI plunged more than 11% for the week, breaking a three-week winning streak. The stock market took its cues from oil trading, which allowed for the S & P 500 and Nasdaq records and weekly gains of nearly 3.5% and more than 4%, respectively. Monday is the last day of June and Wall Street's second quarter. For the week ... S & P 500 week to date (WTD) up 3.44%; first positive week in three Month to date (MTD) up 4.42%; on pace for its second positive month in a row Quarter to date (QTD) up 10%; on pace for its best quarter since first quarter 2024 Nasdaq WTD up 4.25% MTD up 6%; on pace for its third positive month in a row QTD up 17.2%; best quarter since second quarter 2020 Energy represents a major input cost, often one of the largest, for just about every business in the world, so a sustained increase in energy prices would crunch profit margins or force price hikes in order to preserve them. At the same time, it represents a large unavoidable cost for consumers, whether they're trying to air condition their homes in the summer, heat their homes in the winter, or fill up their cars. Given these high priority needs, elevated energy costs end up cutting into discretionary budgets – meaning activities such as eating out or shopping would get cut back. The quick pairing back of those energy price increases this past week, however, means that analysts don't need to downwardly revise estimates for growth, inflation, or consumer spending – at least not yet. The full impact of President Donald Trump 's tariffs is still unclear, though they will almost certainly lead to higher prices for consumers. While the de-escalation of tensions in the Mideast, and subsequent pullback in energy prices, were certainly the most important factors supporting this week's market action, interest rate expectations were also in focus. Though several voting members of the Federal Reserve's policymaking committee, including Fed Chairman Jerome Powell , threw cold water on comments from Fed Governors Christopher Waller and Michelle Bowman that they were on board with a July rate cut, investors have nonetheless started to price in a higher likelihood that we see three Fed rate cuts by year-end, up from the odds of just two cuts only a week ago. That's according to the CME FedWatch Tool . Another important update that could influence interest rate decisions came Friday, with the release of the May personal income and spending report. Within that report, we find the personal consumption expenditures (PCE) price index, the Fed's preferred measure of inflation. While headline PCE was in line with expectations, up 0.1% month over month and up 2.3% annually, the core rate was a bit hotter than expected, rising 0.2% month over month and 2.7% versus the year-ago period, both one-tenth of a percentage point above expectations. The warmer core reading, which excludes food and energy, is something to watch and cuts against the case for a July rate cut. Digging into the portfolio, we hosted our June Monthly Meeting this week, providing a rundown of all 30 holdings. Jim Cramer highlighted six rallying stocks that members may want to consider booking profits in, and five others that look like buys. We also answered key member questions and touched on all 10 names in our Bullpen, including Cisco Systems, which was added on Monday . The Bullpen is our watch list of stocks that could, under the right circumstances, join the Charitable Trust. During the June meeting, Jim was itching to buy Cisco and Boeing but decided to wait. Sticking with portfolio updates, Nvidia hit new all-time highs this past week as sentiment around artificial intelligence and data center demand continued to improve. Analysts at Loop Capital slapped a $250-per-share price target on the stock, highlighting the hyperscaler purchase intentions over the next few years, the compute intensity of reasoning models, and increased inference demand resulting from AI agent adoption. Already regaining the title of the most valuable U.S. public company at more than $3.8 trillion, Nvidia at $250 represents roughly 60% upside to Friday $157 close and a market cap of more than $6 trillion. Needless to say, Nvidia was our top performer for the week up more than 9.5%. Data center plays — Eaton, GE Vernova, and Broadcom are also expected to benefit from the AI strong demand. On Tuesday, analysts at Morgan Stanley raised their price target on GE Vernova, while analysts at HSBC upgraded Broadcom to a buy from a hold rating. Broadcom, Eaton , and GE Vernova were our next best stocks for the week. Goldman Sachs rounded out the week's top five as financial stocks got some incrementally positive news this week when the Fed, on Wednesday, proposed lowering capital requirements for large U.S banks that were implemented in the years following the 2008 financial crisis. The move would allow banks, including Club holdings Goldman and Wells Fargo , to lend more freely while making it easier for them to buy more U.S. government bonds. Amazon continues to be in the news as investors work to better understand the opportunity the company has in new areas like online grocery shopping, thanks to its massive logistics network and the implications of advancing it through generative AI, robotics and autonomous vehicles. In health care, shares of Eli Lilly advanced this week despite data released Monday on the company's experimental weight-loss drug, bimagrumab, which is designed to help patients preserve muscle mass. It failed to wow investors. Abbott Laboratories , meanwhile, got some positive news Tuesday when Health & Human Services Secretary Robert F. Kennedy Jr. said that his department will encourage the use of wearable health devices. "My vision is every American is wearing a wearable within four years," RFK Jr. said at a House Energy and Commerce Committee meeting . The news may also bode well for devices like the Apple Watch, especially as more health-related sensors are built in. Speaking of Apple , we still believe it is an incredible company with the "greatest product in the world," as Jim put it , referring to the iPhone. However, we think the company would benefit from modifying its capital allocation plans , focusing less on the buyback and more on AI development, be it via internal R & D, paying up for top talent, or acquiring groundbreaking startups. (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 . 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