Hot CPI and Mixed Bank Earnings Weigh on Stocks as Chip Selloff Persists

Bank earnings continued to flood in. Morgan Stanley beat top- and bottom-line estimates, driven by a huge beat in equities trading, though its shares were not doing much. Bank of America missed on revenue and was hit with a $1.2 billion penalty by the Treasury Department over money laundering violations; its shares fell more than 4%.

The big banks that reported Tuesday were all strong in different ways, Cramer said: JPMorgan for scale, Goldman Sachs for making money away from M&A, and Wells Fargo for integrating investment banking on top of profitable traditional consumer growth in auto loans and credit cards. Cramer said the Club owns Goldman and Wells and upgraded both stocks on Tuesday.

Semiconductor stocks remained under pressure. Negative spillover from SK Hynix's trading in Korea weighed on the U.S. market, and the iShares Semiconductor ETF was riding a six-day losing streak, its longest since May of last year, Cramer said. After such big declines, sharp advances typically follow, but better-than-expected results from Dutch lithography machine maker ASML did not appear to help sentiment Wednesday morning.

Micron, a Club name, has been in the blast zone of the chip selloff, down almost 9% in the past week, Cramer said. He cited a post from Elon Musk on X: 'Micron has been reasonable regarding future memory prices, while others have been extortionate, which is something today's customers won't forget. Micron is making the smart move for long-term customer loyalty.'

Truist started coverage of Qnity with a buy rating and a $170 price target, implying 38% upside to Tuesday's close. Analysts said the DuPont spinoff's array of materials crucial to AI chip manufacturing and packaging is 'supportive of durable above-market growth,' Cramer said, adding that the coverage recognizes the Club name's key role in the semiconductor supply chain.

Barclays downgraded Dell to hold from buy and also downgraded fellow server maker HP Enterprise, taking a more cautious stance toward hardware stocks. Analysts argued that valuations look full, the boost to revenue from memory prices will start to fade, and they are not seeing a meaningful AI inflection yet, according to Cramer.

Microsoft, a Club name, finally eclipsed last October's record close on Tuesday and rose again Wednesday morning, Cramer said. Citi raised its ServiceNow price target to $170 from $154, extending a software-over-hardware story that has propelled Microsoft. Cramer wrote that enterprise software stocks are so back that investors have to wonder whether they, not hardware, are the repositories of AI and hardware was a passing phase.

Apple shares extended gains after a record-high close on Tuesday, the day the Club name unveiled its new HomeView smart home hub featuring Siri AI at a $299 price tag. Cramer said he visited an Apple showroom and liked what he saw, but he still thinks the main catalyst for Apple is the new iPhone Duo, a foldable device whose preorders open Friday.

Jefferies upgraded Brinker International to buy from hold, saying the Chili's and Maggiano's operator is going from a turnaround to a durable compounding story. Brinker rose another 3% after closing up 4% on Tuesday. Cramer said CEO Kevin Hochman has worked wonders for Chili's and he likes his gameplan to keep it going. Jefferies also upgraded Texas Roadhouse to buy, calling it a 'consistent, quality growth story.'