Each weekday, the CNBC Investing Club with Jim Cramer hosts a “Morning Meeting” live stream at 10:20 a.m. ET. Here’s a recap of Friday’s key moments. Banks Could Benefit From Bigger Rate Hike Eli Lilly Quarter Saw Misfires, New Drugs Quick Mentions: STZ, AMZN, MRVL 1. Banks Could Benefit From Bigger Rate Hike The Mass Nonfarm payrolls rose 528,000 for July and the unemployment rate fell to 3.5%, according to Bureau of Labor Statistics. The numbers beat Dow Jones estimates of 258,000 and 3.6%, respectively, with the latter now back to pre-Covid pandemic levels and tied for the lowest unemployment rate since 1969. 10-year Treasury yield jumped and stocks fell after the release. The scorching labor market and still-high inflation suggest the Federal Reserve still has some work to do, depending on where the data comes in over the next six weeks. So the market is now seeing a third straight central bank interest rate hike of 75 basis points in September, more aggressive than the 50 basis points that were expected before the jobs count. There is no Fed meeting scheduled for August. Another 75 basis point hike by the Fed, albeit a possible slowdown in the overall stock market, would be great for banks as they could charge more on loans and “perhaps the strength in the labor market leads to less more loan defaults than expected,” said Jeff Marks, director of portfolio analysis for the Club. “I think it’s kind of like the total nirvana situation.” We wouldn’t be surprised to see Wells Fargo (WFC), one of our club’s largest holdings, soar. If it goes to $50 per share, we’ll probably drop some stocks. Remember we said recently not to be greedy and take profits when you can on bounces – because this year’s bear market has taught us that anything can happen. 2. Eli Lilly’s quarter saw misfires, new drugs We believe investors have mistakenly focused on Eli Lilly’s (LLY) shortfalls after the company released its latest quarterly results ahead of the opening bell Thursday. We recognize that the company missed its estimates and reduced its full-year guidance. However, the issues they dealt with were explainable – for example, there were currency headwinds and a new accounting practice. Nothing has shaken our faith in the underlying business. The focus should be on Lilly’s new type 2 diabetes drug, Mounjaro, which appears to be doing exceptionally well. The company said it sees a lot of volume coming in from new customers to the drug class. This means Mounjaro’s demand is not cannibalizing demand for Trulicity, another type 2 diabetes drug, but rather taking market share from competitors. We also learned that the Food and Drug Administration (FDA) has accepted Lilly’s Alzheimer’s treatment drug for review as part of its fast-track approval pathway. We reduced our position in LLY a few times to $330, and it’s been down ever since. But before raising our rating to 1, we ask ourselves: what is the right price to buy LLY? Do drugs have visibility when people hear about them? What is the economy doing? 3. Quick Mentions: STZ, AMZN, MRVL We’re looking to buy more Constellation Brands (STZ) stock if the economy picks up, as people tend to exit more when their wallets are full. However, if growth continues to slow, we like our position in Constellation Brands – home to Mexican beers Corona, Modelo and Pacifico – as a recession-proof play. Despite higher prices due to inflation and slowing economic growth, people are still going out after being locked down during the height of the Covid pandemic. And Corona, Modelo and Pacifico beers are popular in the summer. Amazon (AMZN) is acquiring iRobot for $1.7 billion, the companies announced on Friday. We think Amazon’s purchase of the maker of Roomba makes sense, especially since the robots would pair well with Alexa, Amazon’s virtual assistant offering, and the concept of the connected home. The e-commerce and cloud giant appears to be striking a series of deals, including recently agreeing to buy primary healthcare provider One Medical. As for Marvell Technology (MRVL), an Investing Club member recently asked us how long our investment horizon is. We believe MRVL is a multi-year story due to advancements in data infrastructure markets like cloud, 5G and automotive connectivity. (Jim Cramer’s Charitable Trust is long AMZN, LLY, STZ, MRVL, WFC. See here for a full list of stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a shop. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
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