Election Day: Here is the No. 1 issue we're watching as a signal for stocks

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Stocks are largely higher, with the Nasdaq up roughly 1% and the S&P 500 up about half that. Both indexes are coming off three-session losing streaks due to selling in AI-related names. However, investors on Tuesday are turning back to semiconductors and power, electrical equipment, and liquid cooling providers like Eaton, which posted strong quarterly results and raised its full-year outlook. The rotation back into chip stocks comes after Apple shares fell about 2% after providing a disappointing gross margin outlook due to the rising cost of memory chips, which are made by Micron. Apple shares closed at a record high last Thursday. They have recently outperformed hyperscalers Amazon, Meta Platforms, Microsoft, and Alphabet — so it may not be a complete surprise to see those names rebound as shares of the iPhone maker decline. It is worth noting that Apple stock has cut its losses from Tuesday's session lows down nearly 4%. Treasury yields rose Tuesday despite a small drop in oil prices. The recent trend has been for bond prices to rally in a flight to safety when AI stocks sell off. With chip stocks and other AI names rebounding, we're seeing the reverse, with bond prices falling and yields rising. To a lesser extent, yields may also be reacting to better-than-expected economic data, with the government's job openings and labor turnover survey (JOLTS), as well as factory orders and durable goods orders, all beating expectations. The most important economic release of the week is Friday's nonfarm payrolls report. Election Day is here, and our focus isn't necessarily on who has control of the House and Senate. The issue we have raised since August was the rise in anti-data center rhetoric among politicians leading up to the midterms. We want to see whether those stances ease once the voting is done. In the absence of negative news, the midterms could act as a clearing event for the AI trade, though questions remain about how the buildout gets funded from here. Additionally, we've been holding off on meaningfully deploying capital from our large cash position in the portfolio as we wait to see whether the election is followed by a major escalation in the Middle East. After the bell earnings include Advanced Micro Devices, Super Micro Computer, Amgen, Arista Networks, Booking Holdings, and Block. Before Wednesday's open, materials supplier to the semiconductor industry Qnity Electronics is out with its quarterly results. Other companies reporting include CVS Health, Cencora, Uber, Novo Nordisk, Kraft Heinz, McDonald's, and Stanley Black and Decker. On the data side, we get the S&P Global U.S. Services PMI and the ISM's Services Index. (Jim Cramer's Charitable Trust is long ETN, AAPL, MU, AMZN, GOOGL, MSFT, META. See here for a full list of the stocks.) 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.