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.
Markets fell broadly on Tuesday, reversing a large chunk of Monday's more than 2% gains in the S&P 500 and Nasdaq. Volatility remains elevated, with stocks flipping from one day to the next. That's why we are hesitant to chase stocks higher or turn too negative after a big downdraft.
What the market is struggling to sort out is the midterm election's impact on the data center buildout and the ongoing controversy at Nvidia. We downgraded our rating on the chipmaker to a 2 on Tuesday morning because there is too much uncertainty for us to buy shares, even after a 10% decline over the past two days.
The 10-year Treasury yield surged back to 5% after the October consumer prices came in hotter than expected. The CPI rose 0.4% year over year, faster than the 0.3% that economists expected. Core CPI, which strips out volatile food and energy prices, increased 0.3%, above the 0.2% forecast. No year-over-year figures were provided because last year's government shutdown prevented the release of October 2025 data.
The CPI sharply raised Fed rate hike expectations at its upcoming December meeting. Not only is the market now fully pricing in a 25-basis-point increase next month, but it also puts a 12% probability on the Fed raising rates by 50 basis points, according to CME FedWatch.
Federal Reserve Governor Christopher Waller got the 50-basis-point conversation going early Tuesday, before the data was released. Waller said at an event in London that he was "leaning toward" raising rates if October's data was soft, but would support "more robust action" if the data came in hot. And that's exactly what we got.
GE Vernova shares tumbled Tuesday after SoftBank decided to re-think the way it purchases power equipment for its U.S. artificial intelligence data centers. To that end, the Japanese conglomerate disclosed that it recorded a $3.7 billion loss in the six months ending Sept. 30, related to "non-refundable advance payments," or so-called slot fees, paid to secure equipment amid fears of shortages.
The reason? SoftBank management said that the ebb and flow of U.S. data center construction is happening so fast that it might have to adjust which equipment gets assigned to which project. Included in this purchase process overhaul is SoftBank's massive Ohio data center project, for which GE Vernova is the supplier of natural gas turbines used to generate behind-the-meter energy.
SoftBank said the Ohio project is on track, but the contract is being revised. It also said that Elon Musk claims last week in an X post that SoftBank was defaulting on its turbine orders is "simply not correct at all."
GE Vernova told Reuters there is "no negative or positive impact" based on the SoftBank changes.
In a Tuesday note to clients, JPMorgan wrote that if any delays or cancellations were to occur, GE Vernova could shift the order to waiting customers.
Jim Cramer had a similar read on the situation. "The company is booked through 2029-2030," he said Tuesday on CNBC. "If there are slots available, they're going to be taken by the end of the day."
The roughly 6% decline in Club stock GE Vernova is an overreaction. However, we are not rushing in to add to our data center exposure right now, considering the concerns about a slowdown in the buildout due to the Democratic wave in last week's midterm elections.
CoreWeave reports earnings after the close, and what the neocloud company says about compute demand, the funding environment, and the ability to build new data centers in the U.S. could influence sentiment around the AI trade.
There are no major earnings before the opening bell on Wednesday. The only economic release Wednesday is weekly mortgage applications. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.)
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