Jim Cramer, host of Mad Money, discussed Tuesday’s market action, noting that the rally following President-elect Donald Trump’s victory temporarily slowed down as Wall Street begins to assess the potential effects of broad tax cuts on the bond market. Cramer pointed out that while the stock market typically reacts positively to tax cuts, there’s a catch.
“What if the Treasury doesn’t have the money? Then just like everybody else, the government has to borrow to make up the difference and it borrows by selling bonds, trillions, trillions of dollars worth of bonds.”
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Even though these tax cuts have not yet materialized, Cramer observed that the bond market seems to be sending a warning signal. He asked whether the country could face an interest rate reckoning if it borrows too much, and pointed out that this is a concern on many minds right now. Cramer continued by suggesting that perhaps investors have been too focused on the stock market rally, putting the cart before the horse, with the horse being the bond market.
Cramer acknowledged that stocks have surged since Trump’s election, but the rally has been uneven. While many investors expect tax cuts across the board—on corporate income, individual income, and capital gains—no one is exactly sure what form these cuts will take. However, it’s widely anticipated that overall taxes will be lower. Cramer noted:
“If it’s at all like 2016 when Trump first became president, the wealthy will be the biggest beneficiaries. And when rich people get more money, the theory goes they invest in stocks, create new businesses… It has always worked for the stock market.”
But Cramer warned that there’s another side to the equation: the bond market. On Tuesday, it became clear that investors in bonds were reacting nervously to the possibility of unfunded tax cuts. Interest rates surged across all maturities, signaling a shift in sentiment. Cramer emphasized that when you look at how large and fast the bond market’s move has been, it highlights a critical concern: the federal government is already borrowing trillions of dollars from the bond market, and this is happening before any tax cuts have even taken effect. He explored the possibility that this is why the bond market is responding so negatively, making it more difficult for the stock market to keep climbing at the same pace.
“If you believe we’re about to get big tax cuts, remember that somebody eventually has to pay for the missing tax receipts, as boring as that is, even if that means the government borrows a lot more money, causing bond yields to spike. We can only hope the stock market goes back to ignoring long-term interest rates or that those rates come back down in response to some benign inflation numbers.”
Jim Cramer on Shopify Inc. and Others
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episode of Mad Money on November 12 and listed the stocks in the order that Cramer mentioned them.
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8. Live Nation Entertainment, Inc. (NYSE:LYV)
Cramer highlighted how Live Nation Entertainment, Inc.’s (NYSE:LYV) stock gained after it posted its third-quarter earnings results.
“As is always the case, there are pockets of positivity that seem immune to the tug of the bond market, at least for most of the session… And Live Nation Entertainment jumped nearly 5% in the wake of some great numbers.”
Live Nation Entertainment (NYSE:LYV) is a live entertainment business that promotes music events, manages ticketing services, and sells advertising and sponsorships, while also owning and operating various entertainment venues. According to its third-quarter earnings report released on November 12, it reported revenues of $7.7 billion, with an operating income of $640 million for the period.
Through October, the company sold 144 million tickets for concerts, marking a 3% increase compared to the same period in 2023. This growth in ticket sales is part of a broader trend in consumer engagement with live events, which also includes higher spending by fans at venues. For instance, there were double-digit increases in on-site spending per fan at major festivals during Q3, which attracted over 100,000 attendees.
Additionally, at amphitheaters, there was a 9% year-to-date increase in spending for concerts by the same artists, indicating strong demand for live entertainment experiences. Ticketmaster, the ticketing arm of Live Nation Entertainment (NYSE:LYV) also saw a rise in transactions. In October, ticket sales for all events on the platform were up 15%, with concert-related ticket sales increasing by 23% over the same period. This surge reflects the ongoing strength of the live entertainment sector, particularly in the concert space.
7. Shopify Inc. (NYSE:SHOP)
Mentioning Shopify Inc. (NYSE:SHOP), Cramer said:
“As is always the case, there are pockets of positivity that seem immune to the tug of the bond market, at least for most of the session… Shopify, the e-Commerce enabler shot up 21% to a new high, in response to a magnificent quarter.”
Shopify (NYSE:SHOP) is a leading e-commerce platform that helps merchants manage and sell products across a variety of channels. In the third quarter, the company posted a net income of $344 million on total revenue of $2.16 billion, reflecting a 26.3% year-over-year increase in sales. Net income nearly doubled, rising from $173 million in the same period last year to $344 million, driven by gains from equity investments.
For the fourth quarter, the company expects sales growth to be in the mid-to-high 20s percentage range year-over-year. The company also anticipates that its gross profit for the period will continue to grow at a pace similar to the 24% increase seen in the third quarter. Additionally, management expects the company’s free cash flow margin to be in line with last year’s figures for the same quarter.
Shopify (NYSE:SHOP) is also focused on maintaining its global expansion strategy. The company aims to capitalize on the versatility of its platform and the wide range of solutions it offers to merchants in order to capture a larger share of the growing e-commerce market.
6. Microsoft Corporation (NASDAQ:MSFT)
Cramer pointed out how software stocks such as Microsoft Corporation (NASDAQ:MSFT) took off on Tuesday.
“As is always the case, there are pockets of positivity that seem immune to the tug of the bond market, at least for most of the session. After showing immense love for the semiconductors, disdain for the software companies, for most of the year, the game is reversed. The Adobes and ServiceNows and Microsofts soared today. Doesn’t make a lot of sense and… we’re getting worrisome parabolic moves in many of these stocks.”
Microsoft (NASDAQ:MSFT) is a prominent technology company known for developing and supporting a wide range of software, services, devices, and solutions. The company has positioned itself well to capitalize on the rapidly growing demand for generative AI software, an area that Bloomberg Intelligence forecasts will see a massive increase in spending. By 2032, generative AI software spending is expected to rise by 2,790%, approaching $320 billion and growing at an annual rate of 52%.
The company has been tapping into this opportunity by focusing on generative AI copilots, which have shown promising early results. During the first quarter fiscal 2025 earnings call, CEO Satya Nadella highlighted that the company’s AI business is on track to surpass an annual revenue run rate of $10 billion in the next quarter, making it the fastest-growing business in the company’s history to achieve this milestone.
Microsoft’s (NASDAQ:MSFT) Nadella also pointed out that the use of Azure OpenAI has more than doubled in the past six months, reflecting the increasing adoption of AI-driven solutions. Additionally, AI has played a significant role in driving growth in the company’s cloud services, contributing approximately one-third of the cloud services sales growth in the most recent quarter.
5. ServiceNow, Inc. (NYSE:NOW)
Talking about ServiceNow, Inc. (NYSE:NOW) on Tuesday, Cramer said:
“As is always the case, there are pockets of positivity that seem immune to the tug of the bond market, at least for most of the session. After showing immense love for the semiconductors, disdain for the software companies, for most of the year, the game is reversed. The Adobes and ServiceNows and Microsofts soared today. Doesn’t make a lot of sense and… we’re getting worrisome parabolic moves in many of these stocks.”
ServiceNow (NYSE:NOW) offers a comprehensive platform for digital businesses, providing solutions for workflow automation, AI, machine learning, IT service management, and various other enterprise applications. In the third quarter, it placed significant emphasis on its strategic partnerships, which have played a key role in expanding the company’s AI capabilities. The company deepened its collaboration with Nvidia, aiming to accelerate the adoption of Nvidia’s Agentic AI within enterprise environments.
This partnership, along with others with Siemens and Zoom Video Communications, strengthens its ability to integrate advanced AI solutions into its platform, enhancing its value proposition across various industries.
For the full year 2024, ServiceNow (NYSE:NOW) has projected subscription revenue to reach between $10.655 billion and $10.66 billion, reflecting a year-over-year growth rate of approximately 23%. This is a slight increase from its previous guidance of $10.575 billion to $10.585 billion, which had represented expected growth of around 22%. The company also expects a gross profit margin of 84.5% for its subscription services, with an operating income margin of 29.5% and a free cash flow margin of 31%.
4. Adobe Inc. (NASDAQ:ADBE)
Cramer discussed how, in a twist, software stocks like Adobe Inc. (NASDAQ:ADBE) gained. Here’s what Mad Money’s host had to say:
“As is always the case, there are pockets of positivity that seem immune to the tug of the bond market, at least for most of the session. After showing immense love for the semiconductors, disdain for the software companies, for most of the year, the game is reversed. The Adobes and ServiceNows and Microsofts soared today. Doesn’t make a lot of sense and… we’re getting worrisome parabolic moves in many of these stocks.”
Adobe (NASDAQ:ADBE) is a diversified software company that provides a wide range of products and services.is Its stock has faced a year of volatility in the stock market, with notable fluctuations in its performance. One of the key drivers of the company’s innovation in recent years has been AI. The company has integrated AI across its product suite, most notably with tools like the AI Assistant for Adobe Acrobat.
This feature allows users to engage with documents in a more intuitive way, asking questions and receiving customized summaries. Another major AI advancement is Adobe Firefly, a generative AI tool that enables users to convert text prompts into images and even create AI-generated videos.
In addition to these innovations, Adobe (NASDAQ:ADBE) continues to evolve its approach to image creation and licensing. As reported by Reuters on November 12, the company introduced new software tools that allow customers to generate images using AI, based on its extensive library of stock images. These tools offer a unique advantage by ensuring that original image creators are still compensated for the use of their work, even as AI technology drives new ways of creating and interacting with visual content.
3. Tesla, Inc. (NASDAQ:TSLA)
Cramer noted that Tesla, Inc. (NASDAQ:TSLA) stock fell on Tuesday but said that he would not bet against Musk.
“I’d be remiss not to mention Tesla. After days and days of rallying pretty strictly because CEO Elon Musk is tight with the President-elect, the stock took a breather today, falling 6%. Maybe it’s a pause that refreshes. I sure wouldn’t bet against Elon Musk here, but there are plenty of scalpers out there who bought Tesla the day after the election and they aren’t even sure how the company’s doing. For them, this was a short-term Trump trade, and they sure as heck hit the eject button today.”
Tesla (NASDAQ:TSLA), known for its cutting-edge electric vehicles and energy solutions, has seen significant gains in its stock price following the U.S. presidential election. The company’s founder, Elon Musk, has become a central figure in the aftermath of the election, as President-elect Donald Trump appointed him to a newly established role focused on improving government efficiency.
Musk, alongside former Republican presidential candidate Vivek Ramaswamy, will co-lead the Department of Government Efficiency, an initiative that Trump has stated will operate outside the typical structures of government. Trump’s appointment of Musk is seen as a move to streamline government operations by reducing bureaucracy, cutting unnecessary regulations, and addressing wasteful spending. In a statement, Trump emphasized that Musk and Ramaswamy would help pave the way for these changes and revamp federal agencies.
According to Daniel Ives, an analyst at Wedbush Securities, Musk’s increasing influence within the White House could lead to significant advantages for Tesla (NASDAQ:TSLA). Ives described Musk’s involvement in the Trump administration as a strategic move, suggesting that the potential benefits for both Musk and Tesla far outweigh any risks. He characterized Musk’s decision to align with Trump as a “poker move for the ages,” positioning Musk to leverage his growing reach across federal agencies to benefit his business interests.
2. The Home Depot, Inc. (NYSE:HD)
Cramer talked about how The Home Depot, Inc. (NYSE:HD) reported results that surpassed most expectations yet its stock came down because of the bond market.
“Consider the stock of Home Depot. The despot reported better-than-expected revenues, earnings, and same-store sales. They came out at 6:00 AM, stock quickly jumped from $408 and changed to $420. That’s in that market, the Wild West market. But then the bond market intruded, bringing the stock all the way down to $403. Now, it didn’t help that management made some comments on the conference call about how well Home Depot can do when mortgage rates fall to 6%. Any close listener would realize that, with long rates on the rise, again, the opposite will happen. Plus, heaven forbid, we get a hot consumer price index number tomorrow because the one thing saving us from the bond market is the Federal Reserve. But the Fed can’t keep cutting rates if inflation picks up, right?
The Fed controls short rates, which tend to align themselves with home equity loans, vital to Home Depot’s rehab and renovation business. Still, I like this company and we told investing club members that we’d be buyers of Home Depot and we don’t think the negativity’s justified. We grabbed someone in the trust in the morning because we thought the results were just too good to ignore. To me, Home Depot is the single best stock to buy when the Fed’s cutting rates.
I think we got a gift when the stock took a header off today’s bond market action. Once the despot earnings get moving, it tends to really fly and today’s earnings show the momentum is now with the Home Depot bulls like me even if the stock only fell five points to $403 where it was right after the mortgage comment was made. If this gets below $400, I say buy, buy, buy.”
Home Depot (NYSE:HD) is a leading and widely recognized retailer in the home improvement industry. We discussed the company’s third-quarter results in our article, 10 Stocks on Jim Cramer’s Radar.
During its third-quarter conference call, Home Depot (NYSE:HD) management discussed how the current high interest rate environment is putting pressure on larger, typically debt-financed remodeling projects, as well as existing home sales. They noted that since the rate cut in September, mortgage rates have risen by approximately 60 basis points. This increase continues to affect housing turnover, which has fallen to just around 3%—the lowest level in 40 years. Management also suggested that while conditions are tough, they believe the worst may now be behind them.
1. D.R. Horton, Inc. (NYSE:DHI)
Cramer mentioned that homebuilders like D.R. Horton, Inc. (NYSE:DHI) got hit on Tuesday due to higher interest rates.
“Lots of home builders, for instance, got clocked as they should with higher rates. D.R. Horton, which caters to the less wealthy, saw its stock fall $5 or 3%.”
D.R. Horton (NYSE:DHI) is one of the largest homebuilders in the United States, with a history of closing over 1.1 million homes across 125 markets in 36 states. Recently, however, it reported disappointing results for its fiscal fourth quarter, revealing that affordability challenges are beginning to hinder potential buyers. According to Bloomberg, some buyers seem to be holding off on purchases in anticipation of lower interest rates in the coming year.
According to CEO Paul Romanowski, while some homebuyers are waiting for financing costs to drop below a certain threshold, the company believes that “stability in rates” would be the most effective factor in driving demand. Romanowski emphasized that predictability in mortgage rates would help buyers make more confident decisions and create a more favorable market environment for the company.
According to TipRanks, on November 7, Raymond James downgraded D.R. Horton (NYSE:DHI) to Market Perform from Outperform with no price target. The firm cited a “higher for longer” outlook on mortgage rates and housing affordability. This shift reflects the market’s broader concerns in the wake of recent election results, which have contributed to a cautious view of the housing market.
The downgrade also led the firm to lower its EPS estimates for the company, particularly in light of the pressures on entry-level homebuilders. The analyst pointed out that first-time homebuyers, a key demographic for the company, are likely to face even greater affordability hurdles as they head into the spring market.
While we acknowledge the potential of D.R. Horton, Inc. (NYSE:DHI) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DHI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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