Jim Cramer looks ahead to next week's market game plan

Key Concepts

• Pivotal Week: The week is considered pivotal due to the Fed meeting, nonfarm employment report, and earnings from major tech companies (Apple, Amazon, Meta Platforms, Microsoft).
• Union Pacific and Norfolk Southern Merger: A potentially significant merger that could reshape the railroad industry.
• Tariffs: The impact of President Trump's tariffs on various companies and potential trade deals.
• Tech Supply Chain: The role of companies like Celestica, Flex, and Jabil in manufacturing tech products.
• Federal Reserve (Fed): The influence of the Fed's decisions and Chairman Jay Powell's statements on the market.
• Magnificent Seven: The performance and earnings reports of major tech companies.
• Nonfarm Labor Report: The importance of hiring and wage data in influencing the Fed's policies.

1. Railroad Merger: Union Pacific and Norfolk Southern

• Details: David Faber reported on the planned merger of Union Pacific and Norfolk Southern.
• Significance: This merger would have been considered unlikely under previous administrations, as these companies were expected to compete.
• Approval Conditions: The deal might be approved if the combined rail pledges not to raise rates for the next five years.
• Challenges: There are only a few major railroads in the U.S., making approval a tough sell.
• Timeline: A definitive announcement is expected on Monday.

2. Trade Deals and Tariffs

• Context: The week is the last before President Trump's remaining tariffs start in earnest.
• Expectation: Following Japan's lead, more countries are expected to capitulate and agree to trade deals.
• Prediction: South Korea is likely to make a deal due to the presence of U.S. military bases and significant commerce.

3. Earnings Reports: Monday

• Celestica:
  • Role: Celestica, along with Flex and Jabil, manufactures tech products for nameplate companies.
  • Importance: Celestica's report will provide insights into various areas of the tech sector.
• Whirlpool:
  • Impact of Tariffs: President Trump's tariffs on steel have made Whirlpool's competitors more expensive.
  • Potential: The stock could perform well if Whirlpool can sell washers and dryers at full price without competition from dumping.

4. Earnings Reports: Tuesday

• UnitedHealth Group:
  • Criminal Probe: The company admitted to a criminal probe and is cooperating.
  • Positive Development: Cooperation mitigates concerns that Medicare fraud could take down the company.
  • Investment Status: Remains an uninvestable story for the week.
• Boeing:
  • Expectation: Hope for a timetable from Kelly Ortberg regarding the government's control over the number of planes Boeing can make each month.
  • Prediction: The stock is expected to go higher.
• Procter & Gamble:
  • Factors: Raw costs, tariffs, and marketing muscle are key factors.
  • Tariff Impact: Tariffs are expected to negatively impact the company.
  • Currency Tailwind: The company may benefit from a weak dollar.
• Starbucks:
  • CEO Announcement: New CEO Brian Niccol is expected to announce China plans and discuss improvements in throughput.
  • Contrast: Contrasted with the weaker performance of Chipotle, which Starbucks poached Niccol from.
• Visa:
  • Post-Earnings Pattern: Visa often experiences a wave of selling after earnings due to complex financials.
  • Strategy: Buy the dip, as the stock is expected to recover.

5. Federal Open Market Committee (FOMC) Meeting: Wednesday

• Expectation: Fed Chairman Jay Powell is expected to stay the course.
• Comments: Possible comments on the need for caution regarding tariff-induced inflation.
• Term Commitment: Powell is expected to affirm his intention to fill his term, which ends in May of next year.

6. Earnings Reports: Wednesday (Tech Giants)

• Meta and Microsoft:
  • Timing: Both companies report at the same time.
  • Expectation: Both stocks have shown signs of better-than-expected numbers.
  • Microsoft: Focus on CFO Amy Hood's comments during the conference call.
  • Meta: Focus on Mark Zuckerberg's performance, particularly with Instagram advertising. Potential for charging for WhatsApp.

7. Earnings Reports: Thursday (Tech Giants)

• Apple:
  • Strategy: "Own it, don't trade it."
  • Expectation: An unexciting quarter and a slowdown in growth from services revenue stream.
  • Concerns: Worries about receiving $20 billion from Google for being the default search provider, given the judge's view of Google as a monopolist.
  • Litigation: Litigation related to Epic, which is challenging Apple's 30% cut of in-app transactions.
• Amazon:
  • Strengths: Online store, web services business, advertising, and Alexa.
  • Expectation: A very solid quarter is expected.
  • Potential: It's been a while since Amazon stock exploded higher on earnings, and the company needs something exciting to say.

8. Nonfarm Labor Report: Friday

• Importance: Continued growth in hiring with stable wages is needed.
• Impact on Fed: Weakness in the report could lead the president to pressure Jay Powell to cut rates or even replace him.

9. Earnings Reports: Friday (Energy Sector)

• Exxon and Chevron:
  • Chevron: Coming off a legal victory against Exxon, allowing them to buy Hess. Expected to raise numbers, especially with the restart of pumping in Venezuela.
  • Exxon: Uncertain outlook.
  • Oil Prices: Oil prices are expected to head lower due to tepid demand from China and increased drilling and pumping in Venezuela.

10. Conclusion

• Overall Outlook: If the week brings takeovers that would have been unheard of under Biden, good earnings, no pickup in inflation, and big trade deals, the averages could reach record highs.
• Challenges: Despite the difficulty, the market is expected to make it through the week.
• Final Statement: "Don't worry, we've got your back."