Why oil prices matter so much to DuPont, and the big earnings report to watch tonight
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. The S&P 500 and Nasdaq are hitting all-time highs on Tuesday, but the market is trading at its best level of the session. Optimism that the United States and Iran could soon reach a peace deal that would reopen the Strait of Hormuz is providing support, but there is still a lot of uncertainty about whether the deal will be made. Still, US oil benchmark WTI crude oil and bond yields remain low on the day; It’s a positive development for stocks, even as crude oil has rebounded a few dollars from morning lows below $90 a barrel and 10-year Treasury yields have risen above 4.5%. As of this writing, the session low for the 10-year yield is 4.475%. Technology and industrials were the two best-performing sectors on Tuesday, with the AI theme being a big driver of the market’s gains. Leading the charge was memory chip maker Micron, which gained 19% in response to a bullish rating from analysts at UBS. The massive rally pushed Micron’s market value above $1 trillion, making it the 13th publicly traded company in that camp. Micron’s shares have tripled this year and are up more than 800% in the past 12 months. DuPont made a notable gain outside of AI in our portfolio on hopes of a deal with Iran, rising over 2% to roughly $49.25. Shares of the maker of materials for water, healthcare and various industrial markets traded above $50 earlier in the day as oil fell further. Dupont’s relationship with oil is about costs. The conflict in the Middle East has led to increased costs of some inputs, particularly high-density polyethylene and styrene. Since oil is a raw material used in the production of ethylene, high oil prices increase the cost of polyethylene. Note that DuPont implemented additional fees and price increases in its first-quarter earnings release, which management thinks will fully offset rising input costs this year. The company’s ability to cover higher costs was a big reason why shares rose 8% on earnings day. Still, it’s always better to not have to use surcharges, and that’s why the stock outperformed on Tuesday. The recent cybersecurity rally will be put to the test when Zscaler reports after the closing bell. Zscaler isn’t a best-of-breed like Club names CrowdStrike and Palo Alto Networks, but its comments will offer insight into whether companies are stepping up investments to thwart cyberattacks in the age of artificial intelligence. We’re pleased that CrowdStrike and Palo Alto have broken the “AI eats software” problem and achieved a series of record highs in recent weeks. At least on Tuesday their fates changed; CrowdStrike is up almost 2% and Palo Alto has pulled back modestly. Wednesday is a big day for retail and apparel earnings, as Dick’s Sporting Goods, Abercrombie & Fitch, Capri Holdings and Bath & Body Works are scheduled to report. (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. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
