Why stocks moved off their worst levels — plus, a step forward in Honeywell’s split
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 were lower but well off Tuesday’s worst levels as the market grappled with persistent headlines about the Iran war and a continued rise in oil prices due to supply concerns. At the day’s lows, the S&P 500 and Nasdaq fell 2.5% and 2.7%, respectively. Each was down about 1% in afternoon trading. Helping stocks, oil fell from the day’s highs after Politico reported that the United States was considering military aid to help ships pass through the Bosphorus and ease the potential bottleneck. This sent a signal to markets that the Trump administration was aware of rising oil prices, which could have an inflationary effect on the broader economy. Management later confirmed that the Navy would provide escorts if necessary. Stocks’ sharp declines early Tuesday may have surprised some investors, as stocks reversed losses on Monday to post a slight gain in the session. Time will tell if the market can stage another Monday-like comeback, but erasing most of Tuesday’s losses is a great start. While the Iran war and the rise in oil prices capture the market’s attention, it is important not to overlook business developments occurring at individual companies. Take Honeywell, for example, which announced Tuesday morning that it had filed a Form 10 for its planned spin-off of Honeywell Aerospace. This represents a significant milestone towards the establishment of the aviation company, which will trade under the codename “HONA” after becoming independent in the third quarter. Honeywell Aerospace also announced that it will host an Investor Day on June 3 to showcase the business and help investors better understand its organic growth profile and strategic priorities. As we get closer to the separation date, we expect Honeywell shares to move closer to the higher sum-of-parts valuation that an analyst from Wolfe Research pegged at $293 last week. That’s one analyst’s view, but that lofty valuation reflects a 21x multiple on the Aerospace business, a 20x multiple on Automation, which will become RemainCo Honeywell, and a 10x multiple on the Productivity Solutions and Services and Warehouse and Workflow Solutions businesses it is trying to sell. Despite recent market volatility, Honeywell shares were just a few dollars shy of their record high close of $248 on March 2. CrowdStrike reported earnings after the close on Tuesday. This is a chance for CEO George Kurtz to explain to Wall Street why cybersecurity stocks shouldn’t be lumped in with traditional software-as-a-service (SaaS) names, which have recently been crushed by fears of AI disruption. With the Iran conflict, cyber protection may be more important than ever. On Wednesday morning, Abercrombie & Fitch, Bath & Body Works and Brown-Forman reported quarterly results. On the data side, February ADP employment report, S&P Global US services PMI and ISM services index are coming on Wednesday. (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 would wait 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.
