Why Wall Street kept sending the S&P 500, Nasdaq to fresh records this week

CNBC

a day ago

The stock market ended the week higher as Wall Street speculated on how a spate of economic releases would impact the Federal Reserve's next interest rate decision. The S & P 500 and Nasdaq both gained nearly 1% over the past five sessions. Both benchmark gauges hit several record closes this week, with the S & P 500 reaching the milestone on Tuesday, Wednesday, and Thursday. The tech-heavy Nasdaq closed at record highs on Tuesday and Wednesday. Both indexes hit all-time intraday highs on Friday but closed the session modestly lower. Inflation data Stocks were pushed much higher on Tuesday, which carried the week, after the July consumer price index showed inflation had cooled more than expected. This caused Fed rate cut expectations for September to rise. The stock market's run continued into Wednesday's session. On Thursday, however, stocks lost some momentum after July's producer price index indicated that wholesale inflation rose more than expected last month. Despite higher inflation figures, though, the market odds of a rate cut at the Fed's meeting next month didn't decrease by much, according to the CME FedWatch tool. A second Fed rate cut by the end of the year is also expected. Cisco's quarter Our focus was also on quarterly earnings Wednesday evening from Cisco Systems , the latest addition to the Club's portfolio. Cisco beat analysts' expectations for the top and bottom lines during its fiscal 2025 fourth quarter. The company experienced strong revenue growth within its networking business thanks to the boom in AI infrastructure spending. Orders within the networking business surpassed $800 million during the fiscal fourth quarter, bringing the total to more than $2 billion for fiscal 2025. That's double management's goal for the year. Still, shares slipped after the release due to the significant revenue miss in Cisco's security division. That didn't shake our conviction in the stock, though. The Club reiterated our buy equivalent 1 rating , and maintained our price target of $78. "In a market that rewards AI-exposed companies with lofty valuations, Cisco trades at a very reasonable high teens price-to-earnings multiple. That valuation is too cheap to us," Jeff Marks, director of portfolio analysis for the Club, wrote in his earnings analysis. Later in the week, commentary from one Wall Street firm sent Cisco stock lower again. Shares fell 5.5% on Friday after HSBC downgraded the stock to a hold rating from a buy, and lowered its price target to $69 from $73. Analysts viewed Cisco's quarterly report as lackluster and said more stock gains would be hard to come by. "Though the company reported more than USD2bn of AI infrastructure orders in FY25, strength seems to be getting offset by weakness elsewhere," HSBC wrote in a Thursday note to clients. Record highs Although Cisco stock had a tough week, many other portfolio names experienced big runs. In fact, five Club holdings reached record highs since Monday. In no particular order, here's a breakdown of each. Goldman Sachs briefly reached an all-time high Friday of $749.05. But shares then tumbled 2.2% into the close. BlackRock hit a record Wednesday of $1,171.89. The stock drifted lower to around $1,135 by Friday's close. Broadcom on Wednesday touched $317.35, its highest stock price ever. Nvidia shares jumped to a record of $184.48 on Tuesday. Meta Platforms stock climbed to an all-time high of $796.25 on Friday. Portfolio moves We executed three trades last week, including exiting one position entirely. First, we bought more shares of Starbucks and Palo Alto Networks on Monday after unreasonable sell-offs. On Thursday, we sold the rest of our small Coterra Energy position. It no longer made sense to invest in Coterra in the current economic environment. Jim Cramer talked about this at length during the Club's August Monthly Meeting. We didn't just buy and sell, though. The Club changed ratings on two portfolio names as well. A new piece of Wall Street research led us to downgrade Salesforce on Monday to a hold-equivalent 2 rating. Analysts at Melius Research came out with a note that outlined the headwinds that generative AI could have on software-as-a-service companies like Salesforce. Shares then popped nearly 4% on Friday after filings revealed that Jeff Smith's Starboard Value increased its stake in Salesforce by 47% during the second quarter. That renewed bets that activists will push for change again, as they did with success a couple of years ago. After two terrible weeks, the stock finished this week up almost 1%. Two sessions later, the Club double upgraded Eli Lilly shares to a buy-equivalent 1 rating after CEO David Ricks and other company insiders bought a significant amount of the slumping stock. Health-care stocks, which had been struggling as a sector, have gotten a boost over the past week or so. Lilly stock was our best performer this week, jumping 12%. (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.