Procter & Gamble’s lingering China problem, plus Magnificent 7 stocks surprise

By News Room Last updated Sep 5, 2024

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. Mega-cap surprise: The broader market was unable to hold onto its early session gains, though it traded off its worst levels of the session. The losses come despite lower-than-expected initial jobless claims and a solid expansion in the ISM services index. The Magnificent 7 stocks are curiously having a strong day with nearly every stock trading in positive territory, while healthcare is being led lower by the usually steady McKesson after it gave an adjusted earnings per share forecast for its fiscal second quarter that was well below Street expectations. PG’s China woes continue: Procter & Gamble spoke at the Barclays Global Consumer Staples Conference this morning and told a story similar to what we saw last quarter. Roughly 85% of its business is growing solidly, up about 4% year over year and at a rate that’s in line with pre-Covid trends. However, the other 15%, which includes sales in China, remains soft due to what they described as low consumer confidence and value-seeking behavior. According to CFO Andre Schulten, who said he was in China two weeks ago, the market is not yet in recovery but there has been some stabilization. In other words, China isn’t getting worse but it’s not getting better either. Schulten later explained that it’s that 15% of the business that will be swing factor in determining where Procter lands in its 3%-to-5% organic sales growth outlook. “If we see normalization of the consumption rates in China, if we see the Middle East stabilizing and, therefore, we annualize most of the effects that were with us through the second half of this fiscal year, I think we have a shot at being at the upper end. If we see continued slowdown in China, the Middle East situation further deteriorates or something else happens that translates more to the lower end of the range. I feel very good about the 85% of the business.” Overall, we came away with no real change to the PG story. We remain skeptical about a near-term recovery in China, which is why we’ve been selling shares into its recent strength. But we don’t want to sell too much because PG will be on the short list of stocks that work if the economy hits a hard landing. Up next: After the close, we’ll see earnings from Broadcom , Samsara , and DocuSign . Friday is all about the non-farm payroll report. With many questioning if the Federal Reserve can engineer a soft landing, expect the market to move when the data comes out at 8:30 a.m. The current expectation is that the economy added 165,000 jobs in August with a 3.7% year over year increase in average hourly earnings, and the unemployment rate ticking down to 4.2%. (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.

Proctor & Gamble Charmin brand bathroom tissues on display at a store in Vallejo, California, US, on Saturday, Oct. 7, 2023.

David Paul Morris | Bloomberg | Getty Images

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.

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