Home Depot and Nike Downgraded: What Would Make Us Buy

The major averages climbed off their session lows Tuesday, led by gains in Microsoft and Amazon alongside defensive names like Procter & Gamble and Johnson & Johnson. The weakness followed a sharp overnight decline in South Korea's KOSPI Index and continued pressure on Nvidia, Broadcom, Arm, Intel, and other AI chip names. Despite the volatility, Jeff Marks, director of portfolio analysis for the CNBC Investing Club, said he doesn't see any change to the long-term AI investment thesis. He views the recent pullback as a healthy reset after a powerful rally in semiconductor stocks and is prepared to add to favored positions if shares come under further pressure.

Two of the Club's retail stocks received downgrades Tuesday morning. Wolfe Research cut Home Depot to hold from buy, arguing that higher interest rates could keep the housing market sluggish and weigh on demand for home improvement projects. Marks acknowledged those concerns but noted that falling oil prices could help ease inflation pressures and reduce the likelihood of additional Federal Reserve rate hikes.

Meanwhile, Evercore downgraded Nike ahead of next week's earnings report, citing the risk of another round of estimate cuts and continued weakness in wholesale channels. The Club plans to give Nike one more earnings report to demonstrate meaningful progress. If management cuts guidance again, the Club may decide it's time to move on from what has been a disappointing investment.

FedEx reports earnings Tuesday evening, though Marks cautioned that the quarter could be difficult to interpret because the reported results will still include the recently spun-off freight business, while guidance will not. He said investors should focus on commentary about pricing, volumes, and margins rather than headline figures. Newly spun off FedEx Freight reports earnings Thursday evening. Jefferies initiated coverage of the less-than-truckload shipping company with a buy rating and a $200 price target, the highest on Wall Street. The firm cited the company's margin improvement opportunity, strong management team, and improving freight market fundamentals. Marks said the Club shares that bullish view and would consider adding to its position if post-earnings volatility creates a buying opportunity in either FedEx or FedEx Freight.

(Jim Cramer's Charitable Trust is long AMZN, ARM, AVGO, FDX, FDXF, HD, INTC, JNJ, NKE, NVDA, MSFT, PG. 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.