Inflation swaps pricing suggest a gradual decline to 2.6% by mid- Day three of the federal government shutdown came and went Friday, with no end in sight. The stock market saw more all-time highs before the rally ran out of steam. The S & P 500 on Friday eked out a fractional gain for its 29th record-high close since the market's tariff lows in early April. The Nasdaq fell modestly Friday. The record close on Thursday was the Nasdaq's 30th since early April. They both logged four positive weeks out of the past five, getting the new month off to a solid start after strong September and third-quarter performances. Jim Cramer said on Tuesday, hours before federal funding ran out, that a government shutdown is a non-event. "I don't want anyone to sweat it," he added. The market came to the same conclusion. .SPX YTD mountain S & P 500 (SPX) year-to-date performance The best portfolio stocks for the week were health-related: Shares of life sciences firm Danaher surged more than 16% and drugmaker Eli Lilly jumped nearly 16%. The relief rally in this recently struggling sector came after President Donald Trump's deal to exempt Pfizer from pharmaceutical tariffs in exchange for the company's commitment to sell drugs for less and invest more to bring manufacturing back to the United States. Healthcare was the strongest for the week among the S & P 500's 11 sectors. Utilities and information technology were No. 2 and No. 3 this week as the artificial intelligence trade continued to work. Utilities got a boost because of the power needed to run AI data centers. Tech jumped as Club stock Nvidia soared to record highs Thursday. It was modestly lower Friday. Utilities also rose as power provider AES surged on a report that BlackRock's Global Infrastructure Partners was in talks to buy it for $38 billion. GIP, the infrastructure fund manager that BlackRock acquired last year, was also said to be in talks to purchase Aligned Data Centers for around $40 billion. Shares of BlackRock ended flat Friday and just under Tuesday's record-high close. NKE YTD mountain Nike YTD Nike stock advanced after posting quarterly earnings Tuesday evening that far exceeded Wall Street's expectations. The results showed investors that CEO Elliott Hill's turnaround strategy has made progress. Nike previously forecasted that revenue would fall by mid-single-digits on a percentage basis this quarter —but instead, revenue increased by 1%. "Turnarounds require management credibility, and the best way to create that is by beating the guidance you give the Street," Jeff Marks, director of portfolio analysis for the Club, wrote in his earnings analysis. "Nike's results were far better than the guidance that executives offered three months ago." Management's efforts to fix Nike's structural issues are a key reason why the Club initiated its position last week. On Wednesday, we bought more shares after the earnings report highlighted further signs of improvement. We started a Nike position on Sept. 26. BMY YTD mountain Bristol Myers Squibb YTD On Wednesday, we also took some Bristol Myers Squibb off the table to raise cash for better opportunities down the line. Shares jumped earlier this week amid the aforementioned relief rally in large-cap drug names on the Trump-Pfizer agreement. While we trimmed into strength, the Club took a loss of roughly 20% on Bristol Myers stock purchased in November 2024. Our long-term view on Bristol Myers depends on a key trial for its schizophrenia drug Cobenfy, which has suffered some setbacks as of late. BA YTD mountain Boeing YTD On Tuesday, we were buyers of Boeing after the stock surprisingly gave up a lot of its gains that were connected to news of easing restrictions from the Federal Aviation Administration last week. We saw the Sept. 26 announcement from the FAA as a win because it allows Boeing to more easily increase production. If Boeing can deliver more planes, its free cash flow should improve. In fact, Bloomberg reported Friday that Boeing's new 777X widebody jet is now set to make its commercial debut in early 2027 instead of next year. During Friday's Morning Meeting, Jeff pointed out that CEO Kelly Ortberg said at a conference last month that the 777X program was behind schedule, and the company was working through the financial impact. While far from positive, it was not new information. COST YTD mountain Costco YTD The Club made only a small purchase of additional Costco shares on Tuesday. It's a high-quality company whose stock has been in a rough patch. The pullback presented an opportunity, given Costco's consistent market share gains and durable growth story. While Costco's quarterly earnings failed to impress us last week, we were glad to see membership growth and gross margin expansion. Wall Street analysts also made big calls on some of our stocks this week — downgrading Wells Fargo, GE Vernova , and Apple . The bearish commentary began Monday with Morgan Stanley, which lowered its rating on Wells Fargo to a hold from an overweight buy. The analysts cited a lack of near-term catalysts — since the Federal Reserve, over the summer, lifted its $1.95 trillion asset cap on Wells. "We were [overweight] Wells heading into the asset cap removal, viewing it as an underappreciated catalyst for faster EPS growth," Morgan Stanley said. "We see more limited upside from here relative to our [overweight] rated stocks." The analysts also said Wells would not "be a beneficiary" of the Fed interest rate cuts, meaning less upside for its net interest income (NII) streams. Morgan Stanley's call didn't change our conviction on Wells stock, though. We maintained our hold-equivalent 2 rating. What the analysts failed to see is that the Wells' profits aren't as reliant on central bank monetary policy moves as they once were. Basically, Wells has more to offer than just its NII. Fee-based revenues from investment banking and wealth management are slowly becoming a bigger part of the bottom line. Two sessions later, RBC Capital Markets issued a downgrade of GE Vernova stock to a hold from a buy. The analysts cut their price target on shares to $605 from $631. RBC cited challenges in GE Vernova's wind turbine business and concerns about the stock's valuation. As companies need more power to meet the demand from increased data center construction, more business will come to GE Vernova, "I didn't understand this downgrade at all," Jim said during Wednesday's Morning Meeting. "I like how they are positioned." Apple on Friday was downgraded by Jefferies to an underperform sell from a hold. The investment firm said that demand for Apple's latest iPhone 17 and Air models has already been priced into shares, and that expectations for a foldable iPhone 18 next year have become too excessive. Members, however, should tune out the Jefferies note for two reasons. First, Jefferies has changed its rating on Apple five times since the start of the year. Although each downgrade and upgrade had been well-timed, it's much more difficult for everyday investors to time these kinds of trades. "When you see this kind of trading, it is exactly antithetical of everything I've stated," Jim said Friday morning. "This is what kills you [performance-wise]. You cannot sell, hold, sell, hold, sell, hold [as an] individual." Second, we think Apple has more up its sleeve when it comes to innovation for its iPhones. The company is not often the first to market with consumer devices, but it has historically offered the best quality. (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. Costco on Thursday reported another sturdy — if mixed — quarter, demonstrating that its focus on keeping prices low continues to bring more shoppers to its stores at an uncertain time for the U.S. economy. Total revenue in its second quarter of fiscal year 2025 rose 9% year over year to $63.72 billion, topping Wall Street expectations of $63.13 billion, according to estimates compiled by LSEG. Earnings per share (EPS) in the 12 weeks ended Feb. 16 came in at $4.02, missing the consensus of $4.11, LSEG data showed. The reported figure includes a 13-cent hit from foreign exchange rates, a common theme this earnings season among multinational companies dealing with a strong U.S. dollar. EPS rose 2.6% on an annual basis, though the year-ago period included a $94 million tax benefit. Without it, EPS would've been up 8.4%. Costco Why we own it: Costco is the best-run retailer in the world, with a business model focused on offering its members a relatively small universe of products at hard-to-beat prices. Costco has succeeded for decades, but the high inflation of recent years has made the company's value-focused ethos really shine. Competitors: BJ's Wholesale , Walmart , fellow Club holding Amazon Last buy: June 15, 2020 Initiation date: Jan. 27, 2020 Bottom line Costco did not report its prettiest quarter, but a Picasso is still a Picasso. Nothing in the numbers or what was said on Thursday's conference call suggests the best-of-breed retailer has lost a step in both its operations and its appeal to customers who want more bang for the buck and a fun shopping experience. The EPS miss is hardly a back-breaker. Operating margins still expanded on a year-over-year basis for the eighth quarter in a row, albeit at a slightly lower pace than Wall Street expected, and its top-line grew at a hearty 9% clip. Same store sales — often called comparable store sales, or comps — also exceeded expectations during the important holiday quarter. Membership renewal rates also creeped up compared with the first quarter. Shares of Costco were down a little more than 1% in extended trading Thursday. The muted move after earnings is far from unusual with Costco because the company reports sales on a monthly basis, meaning often a lot of the good news is priced into the stock. Indeed, Costco shares were up nearly 4% since its last earnings on Dec. 12 report versus a 5.2% decline in the S & P 500 . COST 1Y mountain Costco's stock performance over the past 12 months. Costco's earnings arrive at a time of growing concern on Wall Street about the health of the U.S. economy and the impact of President Donald Trump's tariff policy on prices and consumer spending. On the earnings call, CFO Gary Millerchip said Costco was not really seeing any change in member behavior compared with the prior few quarters. Members are showing a willingness to spend, but they're just being choosy about what they spend their money on, he said. That dynamic could be even more pronounced if there's a return of inflation and "the potential impact of tariffs could flow through as well," Millerchip said. Costco's merchants try to lean into a choosier consumer by bringing in new and exciting products at attractive prices, he said. For example, he noted that sales of 98-inch and 100-inch TVs, Stern pinball machines and gaming computers were strong during the holiday season. Overall, nonfood categories led the way for Costco's sales growth in the mid-teens on a comparable basis in the quarter. Fresh foods were up high single digits, he said, noting that spending shifts toward lower-cost meats continued. On tariffs specifically, CEO Ron Vachris said Costco can work through the impact in multiple ways, which was reassuring to hear. With Costco's emphasis on a "treasure hunt" shopping experience, Vachris said the company can be flexible with what it sells and, if necessary, replace heavily tariffed products with something else that is less exposed. For items that can't avoid tariffs, such as fresh foods and other grocery items, Vachris offered up a classic Costco refrain: "When it rains, it rains on everyone." He added, "Our people are very well equipped to lower prices and defer any cost increase that comes our way." The great irony in owning Costco is that its stock is not cheap, especially now at nearly 55 times forward earnings estimates. But when it comes to stock-picking, quality often carries a premium. For now, we're reiterating our 2 rating , meaning we'll wait for a pullback before buying more, and price target of $1,100 a share. Commentary Total comparable sales, an important retail industry metric, rose a better-than-expected 6.8% in the quarter, driven by a 5.7% increase in traffic, or shopping frequency, and a 1% increase in ticket. We like to see the gains being led by traffic because it signals that more people are visiting Costco's warehouses, which bodes well for continued market share gains versus retail peers. Excluding the impact of gas price changes and foreign exchange, Costco saw a 9.1% increase in comps. Comparable e-commerce sales, a growing focus for the company and investors, were up 20.9% in the quarter, or 22.2% when excluding foreign exchange. The growth rate is up significantly from the 13% clip (13.2% in constant currency) observed in the first quarter. It's slightly faster than what was observed in the third and fourth quarters of fiscal 2024. Another growth initiative is its advertising business, known as "retail media." After completing its first targeted media campaign last quarter, Millerchip said Costco now has entered into roughly 10 similar programs with partners and "see a lot more in the pipeline." The finance chief said Costco's plan is to use that revenue stream to reinvest in the business and keep prices low, which is good for keeping paying members around. Its worldwide renewal rate was 90.5% and 93% in the U.S. and Canada, up from 90.4% and 92.8% in the prior quarter. It was nice to see the modest increase because executives have cautioned investors that an increase in digital sign-ups, which tend to renew at a lower rate, will impact its retention rate for the fiscal year. Store openings in Asia also can affect the result here, Millerchip said, because they generate outsized membership sign-ups, but also have lower renewal rates. Still, the overall number of paid memberships continued to trend higher, to 78.4 million at the end of the quarter, up 6.8% year over year. That was 300,000 below Wall Street expectations. Costco opened just one warehouse in the second quarter, but it has a few planned openings in the coming weeks, including its 900th location worldwide in Sharon, Massachusetts, which is roughly equidistant from Boston and Providence, Rhode Island. One of the Wall Street analysts on the call said he's a lifelong resident of the town, and the "buzz is high" among people in the community. Of course, that's just anecdotal evidence, but it goes to show the kind of enduring appeal that Costco has among shoppers at a time where Wall Street is closely tracking the company's expansion trajectory. New stores both in the U.S. and abroad represent opportunities to add members and grow sales further. Costco estimates it will end the year with 915 stores, 25 more than at the end of fiscal 2024. That is down slightly from the 916 store estimate provided alongside earnings in December. (Jim Cramer's Charitable Trust is long 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. Paying the "CNBC Investing Club cost" offers tools to reallocate into rate-sensitive sectors such as real estate and banking ahead of policy shifts.