2026 laggards shine in mixed market that kicked off Q3

Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch, an actionable afternoon update just in time for the final hour of trading on Wall Street. Stocks started the new month, third quarter and second half of the year on a mixed note. The market experienced a reversal session in which AI leaders and data center infrastructure development stocks fell, while software and hyperscalers rebounded. The biggest story on Wednesday — Meta Platforms plans to launch a cloud computing business to monetize its data centers and other AI infrastructure. Shares rose more than 10% on the news, which was first reported by Bloomberg and then confirmed by Jim Cramer, easing concerns that Meta was overspending on artificial intelligence. This has been one of the biggest bumps in the stock this year. Until now, Meta was only making money from AI through advertising; It's a great business, but it can be cyclical and there wasn't enough to justify using all the cash flow. Meta was the only major hyperscaler without a cloud business (Amazon has AWS, Microsoft has Azure, and Alphabet has Google Cloud), which explains why Jim has said several times (including in his most recent Sunday column) that he needs a data center business. All four hyperscalers are included in the portfolio. One part of the meta story that still needs to be figured out is what this means for chip demand. CEO Mark Zuckerberg said at the company's annual meeting in May that when it comes to the point where they feel they're overbuilding data centers, one option might be to build a cloud business. So is Wednesday's news a sign that Meta thinks it's overcapacity and therefore won't need as much capex in the future, and is it bad for AI stocks? Or is this a strategic pivot to create new revenue streams? We're not in the camp where industry-wide capital expenditures will decline. We think it's more likely that Meta will monetize its data center infrastructure to generate more immediate profits and cash flow, and provide more resources to invest in AI. Palo Alto Networks extended its recent strong gains after analysts at Wells Fargo raised their price target for the Club cybersecurity name to $420 from $325, calling it an overweight tactical buy idea for the third quarter. Palo Alto Networks shares racked up 70 unanswered points through last Thursday; This caused the stock to rise 24%. We allocated profit for this increase on Tuesday. Financials were having a strong day, with Wells Fargo shares gaining more than 3% after being added to Goldman Sachs' U.S. Conviction List, essentially a list of best ideas. Analysts have a $93 price target for the stock, which represents an upside of about 8% from current levels. Broadcom and Johnson & Johnson are two other portfolio names on Goldman's list. Goldman Sachs buys into the narrative that Wells Fargo moved from defense to offense as it grew its balance sheet after the asset cap was lifted. Although we were a little disappointed with the pace of this transition, we shared this view. The bank's failure to meet revenue expectations for two consecutive quarters helped explain the stock's notable underperformance year-to-date. The stock is down about 8% so far in 2026, lagging its big-bank peers, which are all in positive territory. This underperformance will set a low bar when the bank reports earnings on July 14, but a third straight loss could mean it's time to take our roughly 100% average gain and move on. There are no major earnings reports after the close or before the opening bell on Thursday. The most important news of the morning will be the June non-farm employment report. Economists expect the U.S. economy to add nearly 100,000 new jobs last month and the unemployment rate to remain steady at 4.3%, according to FactSet. Average hourly earnings are expected to increase by 3.5% compared to the previous year. Investors will be watching the numbers closely because the labor market shows signs of strengthening and inflation remains stubbornly high, which could complicate the Fed's policy outlook later this year. Government employment data comes a day earlier than usual on the first Friday of the new month, as markets are closed on Friday for the July 4 holiday on Saturday. (See here for a complete list of stocks in Jim Cramer's Charitable Trust.) When you subscribe 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 trading alert before buying or selling a stock in his charitable foundation's portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. 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