Shares are rising on cool inflation, excessive financial institution earnings – and new guidelines on biotech exports to China
Every weekday, CNBC Investing Club with Jim Cramer publishes Homestretch – an actionable afternoon update just in time for the final hour of trading on Wall Street. Markets: Wall Street rose sharply on Wednesday thanks to the week's second encouraging inflation report and a string of strong bank earnings. The consumer price index (excluding food and energy) was slightly below expectations before the opening bell on Wednesday, a day after a measure of wholesale inflation did the same. The likelihood that the Federal Reserve will cut interest rates twice this year increased following Wednesday's release of the consumer price index, according to the CME FedWatch tool. The hot December jobs report released on Friday had investors rethinking the impending rate cut path. Financials were one of four of 11 sectors in the S&P 500 to gain more than 2% on Wednesday. Communication services, consumer discretionary and technology are the others. Earnings reports drove developments in the financial sector. Club name BlackRock rose about 5% after its results showed recent sellers had jumped ship too early. Wall Street wisely focused on the bigger picture, along with portfolio peer Wells Fargo, sending its shares up 7%. Meanwhile, Goldman Sachs confirmed our recent move out of Morgan Stanley as executives expressed optimism about business activity in 2025. Bristol Vision: The biggest market for Bristol Myers Squibb's new schizophrenia treatment could actually be patients with Alzheimer's disease. That's what business leaders said when they spoke with our CNBC colleague Annika Kim Constantino at the JPMorgan Healthcare Conference in San Francisco. Here is an excerpt from her story. In an interview, company executives said each treatment use they are exploring for Cobenfy has multibillion-dollar potential, including Alzheimer's psychosis, Alzheimer's agitation and cognition, bipolar disease and autism. But Alzheimer's is the “really big market” here, Bristol Myers Squibb CFO David Elkins told CNBC. … There are nearly 6 million patients with Alzheimer's disease in the United States, and about half of them suffer from psychosis or symptoms such as hallucinations and delusions, Elkins said. Cobenfy could be the first drug approved specifically for Alzheimer's-related psychosis, said Adam Lenkowsky, chief commercialization officer. Cobenfy's long-term potential is central to our investment thesis in Bristol Myers, and its opportunities in areas beyond schizophrenia feed into our optimism. Jim Cramer said that Cobenfy's annual sales could one day reach $10 billion, considering all possible uses. We will be keeping an eye out for the results of Bristol Myers' late-stage Alzheimer's-related psychosis study, now expected to be published later this year. Shares of Bristol Myers rose slightly on Wednesday. Portfolio peer Eli Lilly is also involved in the Alzheimer's treatment market, but in a different way. Lilly's Kisunla, approved by U.S. regulators last year, is designed to slow the actual progression of the memory-robbing disease by removing abnormal protein clumps in the brains of Alzheimer's patients. The drug's market launch has been slow. Biotech exports: Club names GE Healthcare and Danaher gave up early gains on Wednesday after news that the Commerce Department is imposing new controls on exports of biotech equipment to China. Citing national security concerns, the agency said the biotechnology tools could be used for “improving human performance, for brain-machine interfaces, for biologically inspired synthetic materials and potentially for biological weapons.” Research analysts at Leerink said Wednesday the rule “appears to be narrow.” That could limit the impact on Danaher. Additionally, Danaher can deploy almost its entire portfolio locally in China, which should help the company navigate controls. We don't think GE Healthcare is selling any products related to this decision, but the stock still fell in sympathy. Additionally, the company has a strong manufacturing presence in China. The new biotech export rules are part of the Biden administration's broader strategy to limit the flow of cutting-edge American technology to China. The White House fears that access to such technology could be used by the Chinese government to strengthen its military capabilities. On Monday, the Commerce Department also proposed new restrictions on AI chip exports, impacting portfolio stock Nvidia in back-to-back meetings. However, Nvidia shares rose 3% on Wednesday, breaking a five-day losing streak. China Update: Before the export decision was announced, GEHC shares opened higher on Wednesday, the morning after what we would describe as a sigh of relief from management in its presentation at the JPMorgan Healthcare Conference. The key takeaway: China is performing slightly better than expected and there are signs of increased activity. While there may be signs of a rebound, guidance remains low and management has been cautious about keeping expectations low by once again exercising caution. Jeff Marks, director of portfolio analysis at Investing Club, said on Wednesday he was glad business in the world's second-largest economy was not deteriorating as it awaited promised stimulus from the Chinese government. Next up: Following strong quarterly results from our three portfolio financial companies, banking results continue Thursday morning with Bank of America and Morgan Stanley. We'll be looking for Nvidia and Broadcom stocks in Taiwan Semiconductor Manufacturing Company's premarket earnings. In addition to the earnings, the government's December retail sales figure will be released at 8:30 a.m. ET. Although not adjusted for inflation, we'll see how shoppers felt over the final month of the holiday shopping season, given the cooler consumer inflation trends outlined Wednesday morning. (A complete list of Jim Cramer's Charitable Trust stocks can be found here.) As a subscriber to 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 foundation's portfolio. If Jim discussed a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. THE INVESTING CLUB INFORMATION SET FORTH ABOVE IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. 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Every weekday, CNBC Investing Club with Jim Cramer publishes Homestretch – an actionable afternoon update just in time for the final hour of trading on Wall Street.
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