We're updating our rating on recently spun FedEx Freight after a strong run-up

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We're updating our rating on recently spun Fed Ex Freight after a strong run-up Published Tue, Jun 9 20262:17 PM EDTJeff Marks@jeffmarkscnbc 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. Stocks are pulling back again as investors take profits in technology and AI infrastructure stocks that had become stretched after their recent run. The selling caught many investors off guard, with the S & P 500 up about 1% shortly after the open before stocks abruptly reversed lower. Our thesis remains that the selling pressure is tied to investors freeing up capital to absorb new supply for the upcoming SpaceX IPO. This concern was why we took some evasive action on Monday, trimming our positions in Goldman Sachs and Qnity Electronics to lock in hefty gains. But another reason for the selling may simply be that many AI stocks have made unsustainable moves since the end of March. Sell-offs like the ones last Friday and today are a good lesson in the dangers of chasing parabolic moves and failing to take profits. Whatever the case, Tuesday's action is also a reminder not to give up on quality companies that have fallen out of favor, such as Johnson & Johnson and Cardinal Health . Both have delivered strong earnings, but neither fit the market's appetite for AI-related stocks. Gains in these stocks are nice to see as the AI part of our portfolio falls sharply. FedEx announced late Monday that its board had approved a 5% increase to its annual dividend. The caveat: it occurs after a one-time annual rate adjustment made in connection with the FedEx Freight spin, which was completed on June 1. The new quarterly payment is $1.22 per share, down from the $1.45 quarterly dividend paid in April. Companies lowering their payouts after separating a business is common. The dividend needs to be adjusted to reflect the cash flow and earnings of the spun-out business. At the new dividend rate, FedEx shares trade with a yield of about 1.5%. When we started the position at lower levels in May, the stock traded at about a 1.55% yield. The key takeaway is that while the optics look like a lower payout, the yield is about the same. FedEx is committed to growing its dividend while using opportunistic share repurchases to at least offset dilution. The FedEx Freight spin-off was perfectly timed with the trucking stocks on fire right now, sending shares well past our initial $175 price target. We're not selling our position because it remains relatively small, and we still want to build it on weakness. But we also aren't chasing shares at these higher levels. As a result, we are downgrading our rating on FedEx Freight to a 2 . We still plan to buy more of both FedEx and FedEx Freight once prices are closer to our average cost basis. Casey's General Stores and Cracker Barrel report after the closing bell, and Chewy reports before the opening bell on Wednesday. The most important economic readout this week is the May consumer price index report , also out Wednesday morning. Economists are expecting a 0.5% month-over-month increase in the index, or 4.2% year-over-year, according to FactSet. The core index, which strips out food and energy, is expected to be up 2.9% year over year. The strong jobs report last Friday raised concerns that the Federal Reserve's next move will be a rate hike, not a cut, and that's a big change from what we and many others in the market thought before the war in Iran broke out. A cool reading would help ease those fears and may provide a welcome relief for the market. (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.More In HomestretchWe're getting closer to upgrading Honeywell as shares pull back into its breakupJeff MarksAs AI-related stocks dive, the market's winners have one thing in commonJeff MarksSlighted market sectors get their time to shine — plus, Costco keeps packing them inJeff MarksRead MoreSubscribe to CNBC PROSubscribe to Investing ClubLicensing & ReprintsCNBC CouncilsJoin the CNBC PanelDigital Produ