We’ll let everyone else fight it out over the meaning and truthfulness of the DeepSeek revelations—as always, we’ll stay focused on the actual evidence, and here’s what we see: First off, the broad AI infrastructure areas look very iffy; the odds favor most chips, networking and electricity stocks are in the so-called penalty box. That said, the rest of the market took on water today but didn’t look abnormal. We do view the dramatic action as a yellow flag but we’re also not panicking as many of the names that had begun to perk up/break out are still acting well enough. We think it’s prudent to drop our Market Monitor back to a level 6 and take things on a stock-by-stock basis from here.

This week’s list does have a couple of AI-related names that got whacked, but the rest are from other areas that look fine. Our Top Pick is a name that looks like it’s finally, decisively changed character. Start small and aim for dips.

Something called DeepSeek out of China helped bring the rally in U.S. stocks to a screeching halt to start the week. Artificial intelligence stocks, in particular, are taking it on the chin, as it appears the Chinese firm may have found a cheaper, just-as-advanced alternative that’s rattling the likes of even Nvidia (NVDA). Chances are, the selling is overdone. But it’s a good time to look for overseas alternatives. And today, we add a Dutch company that plays an essential role in global travel – and one that’s taking advantage of the many missteps of its larger U.S. rival. It’s a stock that was first recommended by Carl Delfeld in Cabot Explorer.

Details inside.

Despite some wobbles early in January the S&P 500 closed at a new all-time high on Thursday. And even though the indexes pulled back marginally on Friday, by week’s end the S&P 500 had gained 1.7%, the Dow had rallied 1.83% and the Nasdaq had added 1.53%.

Despite some wobbles early in January the S&P 500 closed at a new all-time high on Thursday. And even though the indexes pulled back marginally on Friday, by week’s end the S&P 500 had gained 1.7%, the Dow had rallied 1.83% and the Nasdaq had added 1.53%.

After a rough few weeks, the market’s recent rally has been welcome, improving the overall evidence ... though not quite yet in a decisive manner, as the intermediate-term trend is mostly neutral (those close to a buy signal) and many stocks are still toying with resistance. That’s descriptive and not predictive, though, so we did do some buying today, though we’re starting small and will look to build if the buyers stay at it.

Tonight’s issue talks about all of our market thoughts and goes over all of our stocks (including some long-time holdings that are perking up), as well as reviewing a couple of industry groups that are showing intriguing strength after tough down periods.

Before we dive into this week’s idea, let’s clean up some of our January positions, with the headliner being things all worked out well.

January is living up to its volatile reputation but there’s no doubt it’s begun to improve—the intermediate-term trend, which was negative for most everything out there, is back to neutral; the broad market is showing some rapid, intriguing improvement; and individual stocks have improved their standing, with some popping to new highs. To be clear, this isn’t a buying panic, but after a few weeks of tedious action that has brought sentiment down, we’re OK with gradually extending your line while remaining nimble. We’ll up our Market Monitor to a level 7 today.

This week’s list is a mixed bag, with everything from growth to turnarounds to commodity names. Our Top Pick looks like one of the leaders of a new group move after being in the doghouse for a couple of years. Try to get in on dips.

Stocks are finally showing signs of life. After a miserable six-week stretch, stocks – with an assist from cooler inflation numbers – appear to be getting in gear. How long the new rally will last may depend on things like Q4 earnings, the early days of Donald Trump’s second term, and what Jerome Powell says next week. But for now, let’s strike while the iron is hot, or at least warm, and add a growth stock whose name you might recognize since so many people use their platform these days. It’s a new recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

The market rose nicely last week as the bond market worries eased. By week’s end the S&P 500 and Nasdaq had rallied 2.9%, and the Dow had gained 3.8%.

The market rose nicely last week as the bond market worries eased. By week’s end the S&P 500 and Nasdaq had rallied 2.9%, and the Dow had gained 3.8%.

In theory, and often as we prefer, in practice, corporate profits drive stock prices.

J.P. Morgan’s (JPM) booming profits are a testament to this, but what’s behind the profits?

It seems that recently, and perhaps even more in 2025, macro issues will drive the direction of markets and sector trends.

Identifying trends and allocating money to the right sectors and picking the leaders in these sectors is increasingly important. Those that follow the Fed and try to predict the direction of interest rates are one example of this macro-oriented strategy.

Our first Issue of 2025 highlights a variety of solid growth names that have been acting well despite the recent dip in the market. As always, this Issue should have something for everyone.

Xerox (XRX) reported significant year-on-year decreases in both revenue and earnings on Tuesday, showing a net loss of -$113M (versus estimates of +$49.5M) on revenue of $1.5B, down 12.4% from last year’s 1Q. Despite the disappointing results, CEO Steve Bandrowczak remains optimistic about the company’s restructuring strategy, which aims to align Xerox more closely with market demands and improve operational efficiency.

Tesla (TSLA) has had a rough start to the year. Entering Wednesday, TSLA shares were down nearly 42% year to date thanks to a bitter cocktail of sagging revenues, narrowing margins, and increased competition, especially in China. At the start of this week, TSLA shares had dipped to 142, a 52-week low, and were trading at their cheapest valuation on a price-to-earnings basis since last May and on a price-to-book-value basis since 2019.

WHAT TO DO NOW: Remain cautious, though remain flexible. The market’s initial bounce this week was good to see but it didn’t offset the recent weakness, and today’s Meta-inspired selloff didn’t help the cause. All told, our Cabot Tides remain negative, and most growth stocks are still in rough intermediate-term shape—though the long-term picture is still positive. After selling the rest of our Arista (ANET) position last Friday, our cash position is 44%—we’ll sit tight tonight with our remaining names and our cash and see how earnings season continues to play out.

The week was ticking along pretty well until this morning’s first read of GDP (1.6% vs. expectations of 2.2%) came out and shot a small hole in the “at least the economy is doing well” argument that’s helped the market hold up despite persistent inflation data.

Embedded in the GDP report were Q1 core and headline PCE inflation, both of which were a little hotter than expected and up from Q4 of 2023. March PCE data will be out tomorrow and is expected to be the biggest macro news event of the week.

Just when things were getting seriously ugly, the market started having a great week.

Interest rate disappointment is being replaced by earnings anticipation. The new earnings season came in the nick of time. After five straight up months, the S&P was having a terrible April. Last week was the worst week of the year so far and the index has fallen over 5% from the recent high.

Nokia (NOK) missed on revenue but beat on earnings yesterday, reporting EPS of $0.10/share, which exceeded estimates by over 50%. CEO Pekka Lundmark noted that 2024 will probably remain a weak year for the mobile RAN (radio access network) market, but reiterated expectations that it will likely pick up over the final two quarters. Declining demand for 5G equipment in the U.S./Canada, and a significant slowdown in China (also notably affecting AAPL) are the root cause, but economic data has only recently started to inflect.

The market continues to struggle with the rapid jump in interest rates (10-year at 4.63% after hitting 4.7% on Tuesday).

I think we’re still fluctuating somewhere between a code yellow and a code orange situation (was code green a few weeks ago!) so long as that yield doesn’t go over 4.7% and all hell doesn’t break loose in the Middle East.

When I started in this business as an institutional stockbroker, Peter Lynch, the portfolio manager for Fidelity’s Magellan fund, was seen as a master of the game. His forte was picking smaller growth stocks. Upon stepping down in 1990 after his fund became too big to make any small-cap stock pick meaningful, he had delivered, over a 13-year period, a 29% per annum return to investors.

His lessons still ring true today.

There’s a lot of noise out there. Sticky inflation and the Fed’s response to it; Iran getting involved in the Israel-Palestine war; war in Ukraine now in year three; a pivotal U.S. presidential election drawing ever closer; first-quarter earnings season underway, etc., etc. But the only thing that truly matters to the market, at least lately, is bond yields. Specifically, yields on the 10-year U.S. Treasury bonds. The last couple years, the inverse bond yield-stock market correlation has been undeniable.

After five consecutive up months for the market, April has been a bummer. Is this just an overdue end to the recent rally or something worse?

The S&P 500 is down 3.6% so far in April. But the more interest rate-sensitive sectors have faired far worse. Sure, the rally was long in the tooth anyway. But the narrative has also changed for the worse.

This market has been resilient. But that resilience is being severely tested. The next couple of weeks should tell us the near-term direction of stocks.

The S&P rallied higher for five straight months. That’s long in the tooth for any rally. The market is down so far in April and the story is changing for the worse.

Wells Fargo (WFC) kicked off the Cabot Turnaround Letter earnings season today, showing EPS of $1.26/share, which exceeded estimates by 17 cents. WFC also beat top-line revenue estimates by $710M, coming in at $20.86B. Despite the comfortable beats, WFC shares are essentially flat for the day.

Rivian (RIVN) Reports

Enovix (ENVX) and Intapp (INTA) Deliver

TransMedics (TMDX) and Alphatec (ATEC) Report

Sell ATI (ATI) For a Quick 15% Gain; Krystal Biotech (KRYS) Reports

I want to sell a bear call spread in SPY going out to the December 15, 2023, expiration cycle. As mentioned in our alert Friday and issue today, I want to take advantage of the current short-term oversold readings and two unclosed upside gaps from last week.

Well, we’ve seen five straight days of positive gains to the tune of 6%. While this may have helped all of our delta-positive poor man’s covered call positions in the Fundamentals service, the push higher wasn’t as kind to negative delta positions.

ATI, SHOP, DT Report

RELY and RCM Report

Well, there is no doubt that our SPY November 17, 2023, position has been a wild ride. We decided to leg into this one by selling the SPY November 17, 2023, 452/457 bear call spread. Several days after the market presented us the opportunity to leg into the other side of our iron condor. We sold the SPY November 17, 2023, 408/403 bull put spread. In total, we were able to bring in $1.32 worth of premium for our SPY November iron condor.

Repligen (RGEN) Beats in Q3

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Momentum Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Momentum Trader features.