What Cramer is watching Wednesday — mortgage demand collapses, tech red flags

What I am looking at Wednesday, Oct. 26, 2022 Worst mortgage demand since 1997 . The broadening case for the end of Federal Reserve interest rate tightening and the strong dollar, which has dropped sharply in recent days. Early, weaker quarterly summary on tech Tuesday evening from Club holdings Alphabet (GOOGL) and Microsoft (MSFT). Tech continues to be the anti-leader, the group that turns out to be more cyclical, more levered to advertisers who were weaker than thought (crypto, real estate, gambling) and more unwilling to make cuts. For example, Alphabet actually hired 12,000 people. Do they not know how to fire? Companies growing increasingly concerned that halcyon days are over. Here’s a broad overview. No longer in early innings of the cloud, and cloud costs, especially electricity, are way up. Multiples have not come down yet to reflect weakness except at Google-parent Alphabet. Unrealistic disconnect between what is happening in the economy and their own businesses. Much more impacted by Covid (these were Covid stay at home companies). Much more impacted by the Fed than thought. Really all smoked by TikTok, which came out of nowhere to crush margins and take sales. Microsoft weakness is not just in personal computers but the cloud; and cloud is turning out to be expensive to run as it was for Alphabet. So not immune. Cloud has costs like energy. Weakest in five years. Again, an unrealistic state of mind. I do not think that either Microsoft CEO Satya Nadella or CFO Amy Hood think there’s anything fundamentally wrong or even slowing other than PCs, and instead they’re doing just a reset. Alphabet’s Google seems to believe that this is a temporary decline with the exception of some competition from TikTok. Very unrealistic view of what will occur going forward. The ancillary products have not produced enough and the cloud will require more spend without more results. No wonder Google trades at 20x. Readthrough to Club holding Meta Platforms (META), which reports its quarter after the bell Wednesday, is pretty dire because it doesn’t even have consumer goods, which have held up relatively well. Club holding Ford (F) also reports after the bell Wednesday. Texas Instruments (TXN) paints an incredibly grim situation for personal electronics, which it says is down 50%. But TXN not really cutting capital expenditures (capex) and buying back 10% of company stock. Slowdown seeping into industrials now. This stock should be down a great deal. Elevator and escalator maker Otis Worldwide (OTIS) is a good readthrough on global economy. U.S. extremely strong. China, 20% weaker but not in service. Raw costs have come down in China. Boeing (BA) reported a quarterly loss stemming from charges over the contract for new Air Force One aircraft negotiated under former President Donald Trump. However, Boeing did generate nearly $3 billion in free cash flow. Breakout quarter for Boeing because of wide body demand and no more planes left. Bed Bath & Beyond (BBBY) appoints interim CEO Sue Gove to the position permanently. Gove was named interim CEO this summer after the company’s board pushed out former CEO Mark Tritton. Buy Club name Constellation Brands (STZ) off of Canopy Growth (CGC) separation. Disney (DIS) reiterated as overweight (buy) rating at Morgan Stanley, which says shares reflect some macro risk. Expect better numbers but still lowers. Disney+, a dice roll. Has been underearning. Mattel (MAT) strong film slate next year. Disney princess contract beginning of 2023. Barbie will reignite. Wells Fargo upgrades Club holding Halliburton (HAL). Service intensity has increased. (Jim Cramer’s Charitable Trust is long GOOGL, MSFT, HAL, DIS. 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.

A “For Sale” sign outside a house in Albany, California, on Tuesday, May 31, 2022.

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Worst mortgage demand since 1997. The broadening case for the end of Federal Reserve interest rate tightening and the strong dollar, which has dropped sharply in recent days.