Every weekday, the CNBC Investing Club with Jim Cramer provides a timely afternoon update, the “Homestretch,” designed to inform investors during the final hour of trading on Wall Street.
Market Momentum Wanes Amid Tariff Concerns
Wednesday afternoon trading saw the S&P 500 give up its earlier gains. The market appeared to lose steam around noon ET, following President Donald Trump’s announcement of impending tariffs on Canadian and Mexican imports, as well as potential tariffs on goods from the European Union. The stock market showed a bifurcated pattern, with particular sectors leading and lagging.
Unlike recent days, technology and industrial stocks remained in the green, while stocks with less economic sensitivity, like healthcare and consumer staples, experienced declines. The recent rise in defensive stocks reflected concerns about potential economic slowdowns, fueled by a series of soft economic data releases. The Atlanta Fed’s GDPNow forecast, which provides a real-time estimate of real gross domestic product growth, has decreased from 2.9% on February 13th to 2.3% as of February 19th. The next GDPNow update will be released on Friday.
Eli Lilly Announces Major Manufacturing Investment
Eli Lilly, a prominent name in the pharmaceutical industry, revealed plans on Wednesday to invest $27 billion to establish four new manufacturing sites within the United States. This decision is driven by the surging demand for its blockbuster weight loss and diabetes injectables, Zepbound and Mounjaro.
This investment boosts Lilly’s total manufacturing investments in the country to over $50 billion since 2020. CEO David Ricks, in an interview with CNBC, stated that the company’s commitment demonstrates a “huge buildout in our country.” During the announcement in Washington D.C., Ricks said, “We do want to influence the policy environment,” and expressed the company’s intention to collaborate with the Trump administration to expedite government approvals. Ricks added, “We want to build things here. Our factories around the world right now are running 24/7, every day of the year. There’s zero slack.” He further noted that the company is withholding launches of Zepbound and Mounjaro in numerous global markets, including India, as a result.
Three of the new U.S. plants will produce active pharmaceutical ingredients, including tirzepatide, the key component in Zepbound (for obesity) and Mounjaro (for type 2 diabetes). The fourth plant will expand capacity for future injectable products. Ricks also mentioned that tariff exemptions had not been discussed. “We don’t have a tariff policy impacting pharmaceuticals as of yet, but you can bet we’re speaking to the administration about what the contours of that should be.” Lilly has four active manufacturing sites across Europe. While Trump has previously threatened reciprocal levies against U.S. trading partners, the company believes its tariff risk is minimal.
Lilly’s stock rose approximately 1% on Wednesday. Thanks to this week’s rally, shares are trading above $900 for the first time since October. Shares are up more than 25% since their January 17th close. JPMorgan’s positive catalyst watch on its oral GLP-1 medication, ahead of two late-stage readouts for type 2 diabetes and obesity, also contributed to the positive stock movement on Wednesday.
Amazon Unveils AI-Powered Alexa+
Amazon unveiled Alexa+, a new iteration of its voice assistant powered by generative artificial intelligence, on Wednesday. Company executives announced at a devices and services event in New York City that the new version would be available free for Prime members, or for $19.99 per month for non-Prime members. It will be rolled out in the U.S. in the coming weeks.
“It’s not just that she’s really smart and can be conversational, but she can also do something that you just don’t see today in these chatbots, which take real action and get things done,” said Amazon CEO Andy Jassy in a CNBC interview after the event. Speaking about Alexa+ at the Club’s January Monthly Meeting, Jim Cramer commented, “I think the device will become the key to a whole new Amazon ecosystem.”
During his CNBC interview, Jassy also highlighted how Amazon’s cloud business is improving customer experiences through generative AI. Regarding tariffs, he stated that China-based sellers on Amazon should “still sell on our marketplace.” He continued, “Some of the prices may be higher but that will be true for everybody who has sellers, or merchants or partners in China.”
On capital expenditures, Jassy added, “As more companies are trying to do generative AI at scale, they want better price performance to be able to be able to afford it, and that’s what’s driving our investment.”
Earnings Reports to Watch
Nvidia and Salesforce are scheduled to release their earnings reports after the market closes on Wednesday. When reviewing Nvidia’s report, the CNBC Investing Club will focus on their analysis. With Salesforce, the Club is interested in how its AI platform, Agentforce, is performing and whether it is boosting sales growth. The Club also wants to hear from Robin Washington, who has recently taken on the combined roles of CFO and COO, and get her perspective on operating efficiencies and future margin potential.
No portfolio companies are set to report before Thursday’s market open. On the economic data front, the Club will keep an eye on durable goods orders and initial jobless claims.
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