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. Bottom challenges: The recent sell-off in U.S. stocks accelerated Monday and there’s no telling when we’ll hit the bottom. A key reason, according to Jim Cramer: Overseas trading is weighing heavily on Wall Street’s moves. The dramatic action in Japan, in particular, is rippling throughout markets around the world. The Nikkei 225 and Topix — two prominent indexes in the country — plunged more than 12% Monday and entered into bear market territory, down over 20% from a recent high. “I am an adamant believer that you must find the epicenter of selling, at all times, before you try calling a bottom. The epicenter is Japan,” Jim said during the Club’s Morning Meeting.”So, if it’s Japan, you should: One, be looking to buy” stocks in the U.S. that are getting unfairly dinged, Jim added. “But, two, understand that it may not be done because we don’t have a grasp of what’s going on in Japan. It’s very opaque.” One factor believed to be playing a role in the intense selling pressures, though, is the unwinding of the “carry trade,” a popular strategy in recent years that seeks to profit on interest rate differentials. Traders borrow in a currency with low interest rates, like the Japanese yen, and invest in higher-yielding assets. However, significant changes in the currencies can “force you to unwind the trade,” Jim explained. Indeed, the U.S. dollar has trended lower in recent weeks, punctuated by a steep fall Friday. That was triggered by the weaker-than-expected jobs report, which inflamed fears about the health of the U.S. economy and raised expectations around Federal Reserve interest rate cuts in the coming months. The U.S. dollar index , which measures the greenback against a basket of other currencies including the yen, was down again Monday and trading at multimonth lows. This backdrop — although volatile and complicated given the overseas market influence — is nevertheless an opportunity to put cash to work in quality U.S. stocks that are being dragged down. That’s we why scooped up shares of Dover , DuPont , Nextracker and Wells Fargo early in Monday’s session, then in a separate trade later added to our Microsoft holdings. In a third round, we bought more DuPont and Wells Fargo. “Maybe this is a good moment domestically. Remember, we’re not Japan,” Jim said. “We’re American — there are a lot opportunities. It’s not necessarily going to bottom today, but you have to buy something.” Dividends in focus: U.S. Treasury yields, which move inversely to prices, continued to decline Monday on mounting recession fears. The benchmark 10-year note briefly yielded 3.666% in the morning, hitting its lowest level since June 2023. The 10-year yield inched back up to 3.789% by the afternoon. As bond yields drift lower, stocks with higher dividend yields start to look more attractive. But it’s crucial that these dividend payouts are backed by cash flow and can grow over time. We see this in companies with good, healthy balance sheets. As of Monday, our portfolio holds two names with stellar dividends that surpass the benchmark note’s 3.789% yield. Best Buy : 4.68% Morgan Stanley : 3.98% Meanwhile, we have four other holdings with good balance sheets that yield in the 3% range. Moving forward, these are worth watching as Treasury yields could slide even lower if economic concerns intensify. Stanley Black & Decker : 3.41% Coterra Energy : 3.39% Starbucks : 3.1% Up next: There’s no major economic data releases to speak of Tuesday, but the latest tranche of corporate earnings is headlined by the likes of Uber Technologies and Caterpillar before the bell, followed by Super Micro Computer , Airbnb and Timberland owner VF Corp after the close. Investors will be looking for clues about the health of the U.S. economy and consumer in all forthcoming reports and conference calls. (Jim Cramer’s Charitable Trust is long DD, DOV, NXT, WFC and MSFT. 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.
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.
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