The winner’s circle on Wall Street widened out — on Friday, at least — as sleepier parts of the market like industrials powered the lagging Dow higher by 2%. Club name and Dow stock Caterpillar (CAT) was one of the leaders, soaring more than 8% and accounting for over 100 points of the 30-stock average’s 700-point surge. Before it really got going Friday, Jim Cramer said during our Morning Meeting that CAT was one of the most undervalued stocks in our portfolio. Meanwhile, the tech darlings that have recently propelled the market higher — including top-performing Club stocks Nvidia (NVDA) and Meta Platforms (META) — took a relative backseat Friday. However, enough of the tech sector still advanced and boosted the Nasdaq by 1% on Friday, catapulting the index to a 52-week high. The S & P 500 on Friday split the difference, gaining roughly 1.5%. All three of those stock benchmarks were higher on the week. .IXIC .DJI YTD mountain The Nasdaq Composite versus the Dow Jones Industrial Average so far in 2023. At first blush, Friday was the kind of broad-based rally that’s eluded Wall Street for quite some time and prompted market observers to sound the alarm about a top-heavy market — one in which tech stocks seen as artificial intelligence beneficiaries left the rest in the dust. Entering Friday’s session, the Nasdaq climbed more than 8% in the past six weeks — compared with a roughly 2% decline in the Dow during the same stretch. Year to date, the Nasdaq surged more than 26% as of Friday’s close. The Dow in 2023 gained nearly 2%. The S & P 500 this year advanced 11.5%. In the S & P 500, the top three performing sectors Friday — materials, industrials led by Caterpillar, and energy led by fellow Club holding Halliburton (HAL) — were still in the red since the start of April. “We needed” this wider rally, Jim said Friday afternoon on the Homestretch . “We run a diversified portfolio, so we don’t want one-quarter of our portfolio driving everything.” Of course, one day a trend does not make. But the reasons behind Friday’s expansive move — a strong but not too strong May jobs report and congressional approval of legislation to raise the debt ceiling and avert a U.S. default — offer some hope that it may have legs. The debt ceiling, in particular, had been a dark cloud over stocks for the past few weeks. So, the resolution was a welcome relief. And, an employment report that didn’t move the near 80% market odds of a Federal Reserve interest rate pause in June was icing on the cake. Whether that hope is misguided will become clear over time. For now, what we can say with certainty is the Nasdaq has been the clear winner this year as investors jumped aboard the AI hype train. After a bruising 2022, tech has regained its shine. Nvidia, whose industry-leading hardware and software are the train’s locomotive, has beamed the brightest, with a stock price that’s rocketed about 170% higher so far this year. Earlier this week, the chip designer’s market valuation briefly entered the rarefied air above $1 trillion. That milestone came during a five-session stretch, from May 25 to Thursday, in which Nvidia shares climbed 30% following its blowout earnings report after the close May 24. Improbably, Nvidia’s stock actually got cheaper during that rally because of dramatic upward revisions in forward earnings estimates. Nvidia closed at a record high —above $400 per share — this past Tuesday. NVDA YTD mountain Nvidia’s stock performance so far in 2023. Those revisions were needed after Nvidia issued an impressively strong outlook, fueled by demand for its accelerated computing chips used to train generative AI applications. The fervent demand Nvidia is seeing from customers lends credence to the idea that AI is not just a flash in the pan, but a trend with real financial implications for companies. “If you haven’t bought any Nvidia, let it come down in,” Jim said Friday. Investors who are long Nvidia should stay long, as Jim considers it a stock to own, not trade — a designation that he’s only bestowed on one other stock, Club stock Apple (AAPL) Our other large-cap technology Club stocks have dazzled, too. Facebook and Instagram parent Meta set a new 52-week high Friday. At a closing price of $272.61 per share, Meta was still more than $100 below its all-time high close of $382.18, set back in September 2021. Apple hit an intraday high Friday back to Dec. 28, 2021, finishing just about 1 point shy of its record close of $182.01 on Jan. 3, 2022. Microsoft (MSFT) — an investor and close collaborator with OpenAI, the startup behind ChatGPT — notched its highest levels in a year on Wednesday, at $337.50 per share. It’s now within spitting distance of its record close, $343.11 in November 2021. The stock prices of Amazon (AMZN) and Alphabet (GOOGL), both home to cloud-computing divisions that stand to benefit from the growth of AI workloads, rose nearly 48% and 41%, respectively, this year. To be sure, both coincidently closed above $124 per share Friday, firmly below their respective highs of $186.57 in July 2021 and $149.84 in November 2021. After all the heavy lifting these Big Tech firms have done for the portfolio this year, the change in leadership that played out Friday was heartening. We see room for it to continue. Consider that even with Caterpillar’s surge Friday, the stock was down more than 5% year to date and trades at under 12 times forward earnings, compared with its five-year average of nearly 16, according to FactSet. Club industrials Honeywell (HON) and Emerson Electric (EMR) also caught bids Friday. And, in addition to Halliburton, Club oils Coterra Energy (CTRA) and Pioneer Natural Resources (PXD) did, too. We mentioned Friday’s strength in materials, and our one stock in that sector, industrial gas giant Linde (LIN), also gained ground. Bottom line While the AI optimism isn’t entirely misplaced, those companies poised to benefit from the trend are not the only ones with quality fundamentals. However, until Friday, the languishing stocks of those non-tech stocks have suggested otherwise. For that reason, it’s a hopeful sign to see other sectors walk the runway in the Wall Street fashion show Friday. Indeed, Friday is only the sixth time since the start of May that the Dow has outperformed the Nasdaq on a particular trading day. (Jim Cramer’s Charitable Trust is long AMZN, NVDA, MSFT, AAPL, CAT, HAL and GOOGL. 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.
Caterpillar excavators are displayed for sale at the Whayne Supply Co. dealership in Louisville, Kentucky, Jan. 27, 2020.
Luke Sharrett | Bloomberg | Getty Images
The winner’s circle on Wall Street widened out — on Friday, at least — as sleepier parts of the market like industrials powered the lagging Dow higher by 2%. Club name and Dow stock Caterpillar (CAT) was one of the leaders, soaring more than 8% and accounting for over 100 points of the 30-stock average’s 700-point surge. Before it really got going Friday, Jim Cramer said during our Morning Meeting that CAT was one of the most undervalued stocks in our portfolio.