Bad trade headline after another hit the market — but a key economic tracker is looking up

CNBC

5 days ago

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. Markets and trade: Stocks dropped Friday but are still on pace for a solid weekly gain. The market broke down around noon ET after Bloomberg reported that the Trump Administration was planning to broaden restrictions on Chinese tech companies. According to the report, the new rule would require U.S. licenses for transactions with subsidiaries of companies on the U.S. sanctions list. It's too early to know the impact, if any, this could have on U.S. tech companies. One would think most companies have stopped selling to businesses associated with U.S.-sanctioned companies, like Huawei. Until we know for sure, these restrictions represent a negative headline for the tech sector and China-exposed companies that were hoping for the recent detente to continue. Developments over the past 24 hours suggest a notable decline in goodwill between the United States and China. On Thursday, Treasury Secretary Scott Bessent said on Fox News that trade talks with China "are a bit stalled." Then Friday morning, President Donald Trump said on Truth Social that China had violated its recent trade agreement with the U.S. He ended the post by saying, "so, much for being Mr. Nice Guy," in a possible foreshadowing of these new restrictions. We all know by now that everything is subject to negotiation with the current administration, and the technology sector is going to be a big focus of upcoming trade talks. The recent episode involving a threatened tariff increase on the European Union — delayed just days later — served as a key reminder not to overreact to individual headlines. But, the market probably needs the U.S. and China to get along for this rally to continue, so we have to stay focused on what the two countries are saying. Economic activity: Following Friday's data releases, the Atlanta Fed's GDPNow tracker was upwardly revised to a gain of 3.8% for the second quarter from its previous estimate of 2.2% on May 27. To be fair, the model isn't always the most accurate predictor of the growth rate of real gross domestic product. On Thursday, the Bureau of Economic Analysis released its second estimate of first-quarter gross domestic product, showing the economy declined 0.2%. That's much better than the GDPNow final forecast of down 2.7% for Q1 (or down 1.5% using the alternative model that adjusts for imports and exports of gold). So, that's our caution about reading too deeply into one model or forecast. Still, the tracker provides a useful gauge of economic momentum, and the fresh data suggest the economy rebounded solidly in the second quarter, with one month remaining. Up next: Two companies in the portfolio are scheduled to report next week: CrowdStrike and Broadcom . Other notable earnings report includes Campbell's, Dollar General, Five Below, and Lululemon. On the economic data side, it's jobs week. That means data on job openings on Tuesday, ADP private payrolls on Wednesday, and the government's nonfarm payrolls report on Friday. Some of the other key reports are ISM manufacturing, factory orders, and durable goods orders. (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.