2026 laggards shine in Wednesday's mixed stock market that kicked off the third quarter

CNBC Finance

5 min read

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch â an actionable afternoon update, just in time for the last hour of trading on Wall Street. Stocks kicked off the new month , the third quarter, and the second half of the year on a mixed note. The market experienced a reversal session, with AI leaders and data center infrastructure buildout stocks falling while software and the hyperscalers rebounded. The single biggest story Wednesday â Meta Platforms ' plans to build out a cloud computing business to monetize its data centers and other AI infrastructure. Shares soared over 10% on the news â first reported by Bloomberg and then confirmed by Jim Cramer â easing concerns that Meta was overspending on AI. That has been one of the biggest overhangs on the stock this year. Thus far, Meta was only monetizing AI through its advertising, which is a great business but can be cyclical and was not enough to justify using all its cash flow. Meta was the only major hyperscaler without a cloud business ( Amazon has AWS, Microsoft has Azure, and Alphabet has Google Cloud), explaining why Jim has said several times ( including in his latest Sunday column ) that it needed a data center business. All four hyperscalers are holdings in the portfolio. One part of the Meta story that still needs to be figured out is what this means for chip demand. CEO Mark Zuckerberg said at the company's annual meeting in May that if it got to the point where they felt like they overbuilt on data centers, an option would be to create a cloud business. So, is Wednesday's news a sign that Meta thinks they overbuilt capacity and therefore won't need as much capex in the future and bad for the AI stocks; or is this a strategic pivot to create new revenue streams? We're not in the camp that industry-wide capex is going to fall. We think it's more likely that Meta is monetizing its data center infrastructure to immediately generate more profits and cash flow, giving it even more resources to invest in AI. Palo Alto Networks extended its recent run of strong gains after analysts at Wells Fargo raised its price target on the Club cybersecurity name to $420 from $325 and named it an overweight tactical buy idea for the third quarter. Palo Alto Networks stock has put up 70 unanswered points dating back to last Thursday, a stretch that has seen the stock rally 24%. We booked profits into this surge on Tuesday. Financials were having a strong day , and Wells Fargo shares rallied more than 3% after getting added to Goldman Sachs' US Conviction List, which is basically a best idea list. The analysts have a $93 price target on the stock, representing about 8% upside from current levels. Broadcom and Johnson & Johnson are two other portfolio names on Goldman's list. Goldman Sachs is a big believer in the narrative that Wells Fargo is shifting from defense to offense as it grows its balance sheet following the removal of its asset cap. We've shared that view, though we've been somewhat disappointed by the pace of that transition. The bank has missed revenue expectations for two consecutive quarters, helping to explain the stock's significant year-to-date underperformance. The stock is down about 8% so far in 2026, lagging its major bank peers, all of which are in positive territory. This underperformance should create a low bar when the bank reports earnings on July 14, but a third miss in a row may mean it's time to take our roughly 100% average gain and move on. There are no major earnings reports after the close or before Thursday's opening bell. The key news item in the morning will be the June nonfarm payrolls report. Economists expect the U.S. economy to have added about 100,000 jobs last month, with the unemployment rate holding steady at 4.3%, according to FactSet. Average hourly earnings are expected to have risen 3.5% from a year earlier. Investors will be closely watching the numbers because if the labor market shows signs of strength and inflation remains stubbornly high, it could complicate the Fed's policy outlook later this year. The government employment data is coming a day earlier than its usual first Friday of the new month slot because the markets are closed Friday in observance of the Fourth of July holiday on Saturday. (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.

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