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. Markets: Stocks have made a strong recovery Monday, overcoming early selling pressure that was driven by Moody’s downgrade of the U.S. credit rating. Investors were quick to buy the dip, expecting the reaction to be much more muted compared to past rating downgrades, and we were, too . While the S & P 500 opened lower by roughly 1%, the index was down around 0.1% around 2:30 p.m. ET. Bonds also bounced back from their morning lows. The yield on the benchmark 10-year Treasury note, which surged to 4.56% around 9 a.m., has since eased to approximately 4.48%. Settlement progress: Capital One has made headway in a major court case against it. On Friday, the company agreed to pay $425 million in restitution to settle litigation involving its savings accounts. The preliminary settlement, which still needs a judge’s sign-off, was filed Friday evening in a U.S. federal court in Alexandria, Virginia. The development is part of a class-action lawsuit against Capital One, in which 360 Savings depositors allege that the bank froze their interest rates at 0.3%, while failing to advertise to them its higher-yielding 360 Performance Savings account, which paid depositors interest of more than 4%. As part of the settlement, however, Capital One has not admitted to any wrongdoing. Capital One is facing a similar lawsuit from the state of New York. When it was filed last week, the company told CNBC in a statement that it will “vigorously defend” itself against the allegations in court. Still, shares of Capital One are up 1% Monday, to roughly $199 apiece. Any negative sentiment from the legal headache was dispelled over the weekend. Instead, investors are focused on Sunday’s news that the firm’s $35 billion acquisition of Discover Financial is finally complete after a 15-month journey. With the tie-up now complete, Jim Cramer on Monday described Capital One as his “favorite stock.” The merger is a key reason why we started a position in Capital One earlier this year. Management has said it will create an annual $2.7 billion dollars in “synergies,” a catch-all term for the benefits created from the deal, by 2027. Some of those savings will come by reducing Discover’s operating and marketing expenses, and staff reductions could be part of that process. At the same time, Capital One will be investing to grow Discover’s payments network, a valuable asset that competes with Mastercard, Visa and American Express. “You’re going to get analysts talking about [Capital One] as being the next big network,” Jim said during Monday’s Morning Meeting. Another thing to watch out for in the second half of this year is share repurchases, given the excess capital on Capital One’s balance sheet. Banks reaction: Goldman Sachs and other investment banks like Morgan Stanley sold off shortly after 11 a.m. ET in reaction to comments from JPMorgan at its investor day. Shares of Club name Goldman quickly pared those losses as the session progressed. The comment that sent the group lower was JPMorgan explaining that it expects investment banking fees in the second quarter to be down by a mid-teen percentage year over year. It shouldn’t be much of a surprise that investment banking activity slowed as the market dealt with tariff-related uncertainty in April. But the IPO and M & A markets have recently picked up, as we highlighted Friday , and the outlook for the second half of the year has improved significantly with greater clarity on tariffs. Adding to the good news, increased market volatility has driven a spike in trading activity. To that end, JPMorgan said it expects second-quarter trading revenue to up by a mid-to- high-single digit percentage on an annual basis. Up next: There are no major earning reports after the closing bell. Club name Home Depot reports before the opening bell on Tuesday, and analysts at Evercore ISI on Monday added the stock to their “tactical outperform list.” The analysts believe Home Depot shares will trade higher if management reiterates its full-year outlook of a 2% decline in earnings per share and comparable sales growth of 1%, while also explaining on the call that sales trends should improve through the year. Evercore expects this to happen, with analysts modeling that first-quarter comparable stores of minus 0.5% will be the low for the year. Other companies reporting include Viking Holdings and Wilson owner Amer Sports . There are no major economic data releases on Tuesday. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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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