We're changing our rating and price target on a beauty stock tied to China

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. Top heavy : Stocks were on pace for a higher close Monday in what has been a volatile session for both equities and bonds. The 10-year Treasury yield was once again nearing 4.5%. Picking up where the second quarter left off, the mega tech stocks continued doing the heavy lifting for the S & P 500 , with Club names Apple up more than 2.5%, Amazon up over 2%, and Microsoft up roughly 1.5%. The average stock, however, was having a rougher time, as indicated by the S & P 500 Equal Weight index , which was down nearly 1% on the session. Monday was the start of the third quarter on Wall Street, with hopes for the kind of strength the market saw in the first half of 2024. Downgrade : We're dropping Estee Lauder to our 2 rating from a buy-equivalent 1 rating and lowering our price target to $140 per share from $162. That PT is slightly below the current consensus of $148, following a string of negative data points toward the end of last week. First, it was the Nike earnings call, which was downbeat on China. Management said its quarterly results fell below plan there when excluding a timing benefit. Nike lowered its outlook for Greater China — pointing to a highly promotional environment. Then there was a negative update last Friday from L'Oreal CEO Nicolas Hieronimus at a JPMorgan investor event. Globally, the CEO said the beauty market is growing somewhere between 4.5% to 5%, which is slightly lower than previous expectations. The key reason behind the sluggishness is the lack of growth in China's beauty market, which Hieronimus called "quite gloomy right now" with the rebound not materializing. EL YTD mountain Estee Lauder YTD You could argue points: (1) that a lot of this downside could already be priced into Estee Lauder stock down at these low levels and (2) that it is a special situation since the company has said it has moved past its inventory glut and has a profit recovery plan in place to improve margins. We previously thought these two factors would be sufficient for the stock to find its footing. But disappointingly, it has not materialized as expected. If the latest signs point to a Chinese market that is still struggling to recover, then we need to hold off from adding until we see more evidence of this turnaround taking shape. Up next : There are no major earnings reports Monday after the close. But it is jobs week, and the deluge of data kicks off with the government's Job Openings and Labor Turnover Survey (JOLTS) on Tuesday and finishes with the Labor Department's monthly employment report on Friday. (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.

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.