Raphael Stevens

Jim Cramer ripped into Walmart’ s management Tuesday after the retail behemoth r eported quarterly profits that were worse than expected and reduced its full-year earnings guidance. “This was a terrible quarter,” he said on “Squawk Box.” “Inventories bad. Sales bad. Execution terrible. Really is a suboptimal situation. … The execution here is so poor, it’s embarrassing.” Cramer said while all U.S. retailers are having to navigate inflationary pressures, he believes others such as Club holding Costco were able to perform better than Walmart. “When you see disparities like this, that’s because one company is doing better than the other,” Cramer said, adding later: “This should be a big soul-searching moment for Walmart. They need that.” Shares of Walmart, a Club name, dropped more than 9% Tuesday following the results to trade below $134 apiece. The stock has the third-smallest weighing in Cramer’s Charitable Trust portfolio at 1.26% based on Monday’s closing price. Cramer noted that in March, the Club made several sales of Walmart shares at higher stock prices than Tuesday’s early morning action. The stock was trading just north of $144 per share in each of those March transactions. While the Club only owns 250 shares now, Cramer said that’s not the point. “Doesn’t matter if it was 25 shares. We made a mistake,” he said during Tuesday’s “Morning Meeting,” explaining his primary error was believing that Walmart represented a defensive stock for the current environment. He said part of the reason why Walmart’s stock was sliding so much Tuesday was because only a few months ago, management said it expected a mid single-digit increase in earnings per share this fiscal year. Now, the company projects a 1% decrease. “The sellers are motivated and, frankly, correct,” Cramer said. Read the CNBC Investing Club’s full in-depth analysis on Walmart’s disappointing quarter . (Jim Cramer’s Charitable Trust is long WMT and COST. See here for a full list of the stocks.) 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.

A shopper carries a bag outside a Walmart store in San Leandro, California, on Thursday, May 13, 2021.
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When Lucy Yu was 7 years old, she told her mom she wanted to retire and open a bookstore one day. She’d always loved reading and, as the only child raised primarily by her single mother who immigrated from China, turned to books as a source of comfort.
Now, at age 27, Yu is living that retirement dream as her full-time job. In December, she opened Yu and Me Books in Manhattan’s Chinatown, New York City’s first Asian American woman-owned bookstore that centers works from authors of color, immigrants and people from marginalized communities — a place Yu says she’s always wanted to see but never found until she created it herself.

“This was a pipe dream,” Yu tells CNBC Make It. “I didn’t realize the space that I wanted for myself was also wanted by other people. That means so much to me.”

Turning to books through grief and burnout

Yu is a chemical engineer by training and most recently worked as a supply chain manager for a food company. But in January 2021, she hit a wall. She was working 80-hour weeks, dealing with pandemic fatigue and was still grieving the loss of a good friend who died the year prior.
She decided to take three weeks of vacation — her entire PTO allotment for the year — at once.
“As someone who’s struggled with depression and anxiety my whole life, making that decision was very rare for me,” Yu says. “And all I did during that time was read two books a day. I felt like that was all that was giving me the healing and just space that I needed.”
She realized that from the time she was young, “whenever I am in times of intense stress or anxiety, I always turn to books, because they give me such a sense of comfort going into other places and stories outside of mine.”

Yu and Me Books, located in Manhattan’s Chinatown, is New York City’s first AAPI woman-owned bookstore.
Courtesy of subject

One night over wine, she fired up Google and began researching how to open a bookstore and putting ideas into a spreadsheet. “All of a sudden it was 2 a.m. and I had put together this outline” of a business plan, she says. In the following days and weeks, she chipped away at bringing it to life.
By May, she launched a GoFundMe crowdfunding page and raised nearly $16,000. She took those funds, along with her life savings, to rent out a space, cover overhead costs and build an inventory.
She opened Yu and Me Books in December 2021, a tribute to her mother’s initials “YM.”
Yu continued to work her day job until February, when she quit and began running the bookstore full-time. “I just took a shot and hoped it would turn out for the best,” she says, “and I’m really excited that I’m self-employed now. I never thought that would be an option for me.”

Yu and Me Books features stories by AAPI writers, immigrants, authors of color and members of marginalized communities.
Courtesy of subject

Her mother originally questioned why she’d quit her steady 9-to-5 to open a bookstore in the age of Amazon. But after the store officially opened, Yu says, her mother flew from California to New York, “and she stayed with me in the bookstore every day for three weeks, which was so wild, because Asian moms don’t do that,” Yu jokes.
“I think her perception of what the bookstore is and how much people were excited about it changed with her stay here,” Yu adds.

A place for community

Yu jokes that most of what she knows about running a business has come from Google and YouTube. She also learned a lot by calling up other local bookstore owners, including Noelle Santos of The Lit. Bar in the Bronx, and Emma Straub of Brooklyn’s Books are Magic.
Yu has also found a place within Manhattan’s Chinatown, first as a resident and now as a business owner.
“The community in Chinatown is phenomenal,” Yu says. “I think it’s the the most I’ve felt at home in a neighborhood living in the city. And every shop owner shows up for each other,” particularly as the pandemic has strained businesses due to financial hardship and Covid-fueled xenophobia.
Yu understands the importance of running her bookstore in a time of rising anti-Asian violence and discrimination. In addition to carrying around 1,700 handpicked titles that center AAPI and immigrant stories, Yu and Me Books hosts author talks, community readings and other events. The space has a coffee bar and reading nook, and Yu plans to host more book club events and expand the store’s reach beyond New York City. More

Expect mid-to-late cycle dynamics to play out once the inflation scare recedes, meaning financial, energy and materials companies will do best. Then indexes will rebound.
Stocks to keep an eye on include Shell, Eli Lilly and Ulta Beauty.
The investing environment is not nearly as bad as it seems. Good days are ahead.

“Segments of the health-industry should also perform better than most,” says Andrew Graham, founder and managing partner of Jackson Square Capital, pointing to Eli Lilly, in particular.
Tetra Images | Tetra Images | Getty Images

Today’s investment landscape appears bleak, seemingly plagued by a host of factors, including mounting inflation, rising interest rates, an economic contraction during the first quarter and a war in Ukraine that has exasperated already lingering supply-chain issues.
Add it all together, and it’s been a horrible year for stocks. The tech-heavy Nasdaq shed 13% in April, its worst month since the Financial Crisis, and has lost more than a quarter of its value this year.

Other indexes have fared better, but not much. The Dow Jones Industrial Average is off nearly 12% thus far in 2022, while the S&P 500 Index is down more than 16%.
Yet it’s important to keep in mind that what spurred the market’s descent was not a confluence of the issues mentioned above — it was the Federal Reserve. As 2021 drew to a close, fundamentals were reasonably solid. Corporate earnings growth remained strong; the labor market, though tight, was healthy and adding jobs; and consumer balance sheets were in good shape.
More from Personal Finance:What the Fed’s half-point rate hike means for your moneyAs mortgage rates rise, should you buy a home or rent?Rising interest rates mean higher costs for car loans
However, at the beginning of January, policymakers began to signal that they would start to raise rates and rein in their bond-buying program. From that point, the S&P 500 began to tumble, shedding nearly 16% over the next four weeks.
In retrospect, the drawdown should not have surprised anyone. Markets declined by similar amounts the previous four times the Fed began to remove policy accommodation, in 1983, 1994, 2004 and 2015. Notably, however, in each instance, stocks rebounded quickly and reached new highs within 12 months of hitting bottom.

Granted, this is hardly a significant statistical sample. But it’s the sample we have, and for a few reasons, history is likely to repeat itself this time around.
For one, bearish sentiment recently hit a record low, according to a survey compiled by the American Association of Individual Investors. Over the years, when the market outlook is this one-sided, it’s a good contrarian indicator that the opposite will happen.

Similarly, when institutions — hedge funds, pensions, etc. — go light, it’s also a signal to pounce. Such investors are currently underinvested in equities, meaning the market will soon run out of sellers.
The biggest issue, though, is inflation — it’s simply not as bad as most fear. 
When the Fed began to talk about raising rates earlier this year, the bond market reacted reasonably, with yields climbing slowly. Then, Russia invaded Ukraine, increasing the chances that fuel and food costs would rise, and nerves began to fray. Investors responded by bidding up Treasury Inflation-Protected Securities, or TIPS, causing inflation-breakeven yields to skyrocket.
Even so, inflation has likely peaked. Indeed, the upcoming data will have a hard time matching May 2021 comps. At the time, vaccines had just become widely available, which caused spending at retail stores and restaurants to spike as more and more people ventured out.

Therefore, what we are seeing now is a panic, one that could quickly recede once we get more data.
So, what does all this mean?
For starters, expect mid-to-late cycle dynamics to play out once the inflation scare recedes, meaning financial, energy and materials companies will do best. After that, look for indexes to recover and then reach new highs sometime near the end of this year led by cyclical/value stocks.
Specifically, Shell is a name to watch the rest of 2022. As alluded to above, many energy companies are well-positioned in today’s environment, but Shell has perhaps the most upside. The reason, in large part, comes down to liquefied natural gas.

Liquid natural gas a solid bet

A liquid natural gas (LNG) tank.
Artinun Prekmoung / Eyeem | Eyeem | Getty Images

The easier-to-transport form of natural gas is perhaps the key to making Europe less reliant on Russian oil exports. The company dominates this market segment, delivering more than 65 million tons last year.
More broadly, Shell’s integrated gas business represents around 40% of its net asset value, and the company’s scale allows it to generate big margins in dislocated markets. This year, the stock could gain another 30% and pay out a 3.5% dividend.
Segments of the health-industry should also perform better than most. Eli Lilly has the most potent existing pharmaceutical lineup within this sector, and its pipeline is promising.
Though the company’s long-term prospects could hinge on the efficacy of Donanemab, an Alzheimer’s drug in testing that could be a game-changer, shorter-term, the concern is a weight-loss drug aimed at combatting obesity.

It showed promising results in a recently concluded clinical trial. If approved, the drug represents a huge, multi-billion-dollar opportunity.
Meanwhile, despite a recent public relations snafu, Ulta Beauty controls a significant percentage of the high-end beauty and cosmetics market. Admittedly, it lost some ground during the Covid shutdowns, but it is adding more inventory to its remaining physical locations in an effort to capture even more share of this segment.
More and more white-collar professionals returning to the office spells good things for its business, while the cost savings it has created in recent years (it has closed roughly 2,000 stores since 2019) also help.
Fear is a powerful emotion. But that’s where many investors are right now — gripped by fear. And while no one should discount the challenges of the current landscape, the environment is not nearly as bad as it seems. Good days are ahead.

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California’s statewide average for a gallon of gas has surged to a record above $6.
The national average for gas hit $4.523 on Tuesday, according to AAA, also a record.
The rapidly rising price of gas is contributing to inflationary pressures across the economy.

High gas prices at stations in Garden Grove, California, on Monday, March 7, 2022.
Jeff Gritchen | Medianews Group | Getty Images

California’s state average for a gallon of gas has surged above $6, making fuel in the Golden State the most expensive across the U.S.
The average price at the pump in California hit a record $6.021 per gallon on Tuesday, according to AAA. Prices are up 31 cents over the last month, and $1.89 higher than a year ago.

California’s prices are the most extreme, but gas is rising across the country.
The national average hit a record $4.523 on Tuesday, with every state now averaging more than $4.
The sharp jump is in part thanks to a rise in oil prices, which makes up more than half of the ultimate price of gas.
“The high cost of oil, the key ingredient in gasoline, is driving these high pump prices for consumers,” Andrew Gross, AAA spokesperson, said Monday in a statement.
“Even the annual seasonal demand dip for gasoline during the lull between spring break and Memorial Day, which would normally help lower prices, is having no effect this year,” he added.

But oil is not the only factor that influences gas prices, and a lack of refining capacity is also pushing up prices.
Refiners turn oil into petroleum products like gas that we use daily. Demand for products is surging as economic activity returns, but refining capacity is lower than pre-pandemic levels, which is contributing to the rapid price rise.
Retail diesel prices are on the move, too, with the national average for a gallon hitting a record $5.573 on Tuesday. Prices are up $2.40 over the last year.

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United’s 52 Pratt & Whitney-powered Boeing 777s have been grounded since an engine failure in February 2021.
The airline plans to begin flying the aircraft this month and bring them back gradually.

A United Airlines Holdings Inc. Boeing 777-200 aircraft on the tarmac at San Francisco International Airport (SFO) in San Francisco, California, U.S., on Thursday, Oct. 15, 2020.
David Paul Morris | Bloomberg | Getty Images

United Airlines said Tuesday that the Federal Aviation Administration has cleared the path for the return of 52 Pratt & Whitney-powered Boeing 777s that were grounded after an engine failure in February 2021.
“Late last night, the FAA issued the final paperwork on our Pratt & Whitney-powered triple sevens,” United’s chief commercial officer Andrew Nocella said at a Bank of America industry conference.

The planes represent 10% of United’s capacity, “so it’s really, really material,” Nocella added. ‘You really can’t rush safety.”
“The FAA approved the service bulletins that will be used to make the necessary changes outlined in the Airworthiness Directives to the Boeing 777-200 with Pratt & Whitney PW4000 engines,” the FAA said in a statement.
United last week said it plans to bring the planes back gradually once they were cleared, starting later this month, and later expand them to international routes.
The planes were grounded after one of United’s 777-200s heading for Honolulu from Denver suffered an engine failure. It dropped debris in a residential area before returning to Denver’s main airport. No injuries were reported.
The planes’ return had been delayed through at least May 13 from an expected return in April, CNBC reported last month.

United shares were sharply higher in premarket trading Tuesday after the carrier reported it expects second-quarter revenue per seat mile, a gauge of how much it’s bringing in for each seat it flies a mile, to rise as much as 25% over 2019, even though it would fly about 14% less.
The trend shows higher fares for travelers, who have returned in droves after two years of pandemic.
“We’re not seeing any signs of resistance to pricing,” United CEO Scott Kirby said in an interview on CNBC’s “Squawk Box” on Tuesday morning.

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