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. Market update: Stocks made a significant comeback from their early session lows. What’s notable is that the S & P 500 began its rebound right after it broke below the March 13 low of 5504.65. This retest comes just two days before the Trump Administration is expected to impose reciprocal tariffs targeting “all countries.” Dividend increases: To no surprise, TJX Companies formally announced a 13% increase to its quarterly dividend. The company first announced the move last month when it reported better-than-expected results for the fourth quarter. The higher payout pushes the dividend yield to about 1.4%, so TJX is hardly what we would describe as a dividend income stock. But safe, higher-yielding dividend stocks could come back in focus if the 10-year Treasury yield keeps falling. Only two stocks in the portfolio currently have a dividend yield north of 3%: Bristol Myers Squibb and Coterra Energy . Both stocks are outperforming the broader market Monday. Signs of a deal: If you want to gauge the market’s sentiment on a merger closing, a simple way is to compare the stock price of the acquired company with the terms of the deal. Capital One is acquiring Discover in an all-stock transaction where one share of DFS gets you 1.0192 shares of COF. In theory, if the deal were to be completed at the close of business Monday, each share of Discover would be worth about $181.18, or 1.0192 times Capital One’s stock price of about $177.89 based on current prices. The reason why Discover doesn’t trade at the deal terms — the stock is currently $171 — is that the market is less positive the deal will go through. If the discount Discover trades at to the deal terms narrows, the market is giving the deal a higher probability of it closing. If the discount widens, there’s a lower probability it closes. We bring all this up because the top-performing stock in the S & P 500 on Monday is Discover Financial Services. The stock is rallying and the merger discount is narrowing after a publication called The Capitol Forum reported late Friday that the Department of Justice may not bring a case against Capital One over its subprime sector and is refocusing its review to how it could impact consumers with no credit history. The story is significant because two weeks ago Capital One shares sold off to about $165 after the same publication reported that the DOJ may challenge the deal. Analysts were quick to come to Capital One’s defense , noting that the deal would still be accretive if Discover’s subprime portfolio was sold. As a reminder, the deal still needs approval by the Federal Reserve and Office of the Comptroller of the Currency. We are also monitoring a lawsuit brought by The Trump Organization as a potential roadblock. Other deals in the works : DuPont is considering the sale of two brands in its safety portfolio, according to Bloomberg . Kevlar and Nomex are reportedly for sale and could be worth around $2 billion in a deal. We’re not surprised to see DuPont back in the headlines exploring divestitures — Chairman Ed Breen is known for dealmaking. But what makes this story interesting is that it comes more than two months after the company decided to change its three-company breakout strategy into two by ending plans to separate its water business. One possible reason why DuPont decided to keep the water business was to boost the investment case for New Dupont, which will have exposure to businesses in safety, shelter, and other industrial solutions like health care. As a reminder, the electronics spin-off is expected to be completed on November 1. DuPont shedding its Kevlar and Normex could be a very positive development. If the businesses are sold at a good price, DuPont can take the cash proceeds and buy businesses in secular growing industries like water and health care. By reshaping its portfolio, the New DuPont could fetch a higher multiple in the market, helping the stock narrow its discount to its sum of the parts. Up next: It’s a quiet week for earnings. The only notable company reporting after the closing bell Monday is clothing and apparel company PVH Corp . There are no major reports before the opening bell Tuesday. On the data side there is the final read on March S & P Global US Manufacturing PMIs and February JOLTS job openings. (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. 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Screens display the logos and trading information for Capital One Financial and Discover Financial as traders work on the floor at the New York Stock Exchange on Feb. 20, 2024.
Brendan Mcdermid | Reuters
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.
