Issues
Coming off record highs early last week, U.S. equities drifted lower as the week progressed as the first week of the corporate earnings season unfolded. And despite upbeat earnings from select tech and semiconductor names, profit-taking set in across large caps late in the week and kept the major averages slightly underwater by Friday’s close. Small caps bucked the broader trend, continuing their early-year leadership as the Russell 2000 extended gains on optimism around economic resilience and rotation out of mega caps. For the week, the S&P 500 lost 0.4%, the Dow fell 0.3%, and the Nasdaq Composite declined by 0.7%.
The market took a good-sized hit today, and we see the action as a shot across the bow and are remaining flexible. But as always, we’re going to go with what’s in front of us: Right here, many stocks remain in good shape, though clearly things are mixed, while some yellow flags have arisen. It’s imperative to stick with what’s working, aim for decent entry points and actively manage your portfolio (partial profits on the way up, raising stops, etc.). We’ll again stick with a level 7 on the Market Monitor, though the next few days should be telling.
This week’s list has a bigger growth mix, though as has been the case, there’s something for everyone here. Our Top Pick has shown outstanding power and ties into both AI and the recently strong defense and space trades. Try to buy on further weakness.
This week’s list has a bigger growth mix, though as has been the case, there’s something for everyone here. Our Top Pick has shown outstanding power and ties into both AI and the recently strong defense and space trades. Try to buy on further weakness.
Tariffs are back in the news, and the market doesn’t like it. How long they remain in the news is anybody’s guess. Perhaps the situation will be settled over lunch in Davos this week. In the meantime, fourth-quarter earnings season serves as a welcome diversion and ramps up this week after some mixed results from the banks last week. Speaking of banks, today we add a regional play that should pair well with our Morgan Stanley (MS) holding. It’s a lower-risk, income-generating stock that is a new choice of Cabot Dividend Investor Chief Analyst Tom Hutchinson.
Details inside.
Details inside.
*Please note, S&P 500 futures are indicated lower by 1.5% this morning on renewed tariff fears.
Coming off record highs early last week, U.S. equities drifted lower as the week progressed as the first week of the corporate earnings season unfolded. And despite upbeat earnings from select tech and semiconductor names, profit-taking set in across large caps late in the week and kept the major averages slightly underwater by Friday’s close. Small caps bucked the broader trend, continuing their early-year leadership as the Russell 2000 extended gains on optimism around economic resilience and rotation out of mega caps. For the week, the S&P 500 lost 0.4%, the Dow fell 0.3%, and the Nasdaq Composite declined by 0.7%.
Coming off record highs early last week, U.S. equities drifted lower as the week progressed as the first week of the corporate earnings season unfolded. And despite upbeat earnings from select tech and semiconductor names, profit-taking set in across large caps late in the week and kept the major averages slightly underwater by Friday’s close. Small caps bucked the broader trend, continuing their early-year leadership as the Russell 2000 extended gains on optimism around economic resilience and rotation out of mega caps. For the week, the S&P 500 lost 0.4%, the Dow fell 0.3%, and the Nasdaq Composite declined by 0.7%.
*Please note, S&P 500 futures are indicated lower by 1.5% this morning on renewed tariff fears.
Coming off record highs early last week, U.S. equities drifted lower as the week progressed as the first week of the corporate earnings season unfolded. And despite upbeat earnings from select tech and semiconductor names, profit-taking set in across large caps late in the week and kept the major averages slightly underwater by Friday’s close. Small caps bucked the broader trend, continuing their early-year leadership as the Russell 2000 extended gains on optimism around economic resilience and rotation out of mega caps. For the week, the S&P 500 lost 0.4%, the Dow fell 0.3%, and the Nasdaq Composite declined by 0.7%.
Coming off record highs early last week, U.S. equities drifted lower as the week progressed as the first week of the corporate earnings season unfolded. And despite upbeat earnings from select tech and semiconductor names, profit-taking set in across large caps late in the week and kept the major averages slightly underwater by Friday’s close. Small caps bucked the broader trend, continuing their early-year leadership as the Russell 2000 extended gains on optimism around economic resilience and rotation out of mega caps. For the week, the S&P 500 lost 0.4%, the Dow fell 0.3%, and the Nasdaq Composite declined by 0.7%.
Explorer stocks are off to a good start in 2026. Alibaba (BABA) shares soared 15.8% this week as it was reported that Alibaba Cloud has captured about 36% of China’s AI cloud market share. Archer Aviation (ACHR) shares followed last week’s 11.5% gain with a 5.8% gain this week as its CEO presented at Bank of America’s Defense and Commercial Aerospace Forum. Alphabet (GOOG) shares gained more than 4% this week as Apple (AAPL) announced that it had selected Gemini to power a more personalized version of its Siri chatbot. And Coeur Mining (CDE) shares were up 7.7% this week following last week’s 8% gain.
Now we look to a region that is in the headlines, performed well last year, and is likely to be at the center of attention this year.
Now we look to a region that is in the headlines, performed well last year, and is likely to be at the center of attention this year.
The New Year is shaping up to be different from recent years. And market leadership is already changing.
The economy is transforming.
The positive effects of tax cuts and deregulation are starting to take effect. There are also significantly cheaper oil prices, lower interest rates, and the absence of much of the tariff uncertainty from last year. The chances are good that 2026 will feature the strongest economy of the bull market so far.
Most cyclical businesses benefit from a stronger economy. In fact, cyclical stocks have been the best performing market sectors for the past few months. Bank stocks in particular are in a great position because of cheap valuations, rising earnings, and a likely steepening yield curve.
Banks took it on the chin during inflation and rising rates. Although bank stocks have recovered from the loss, they are still near the same price level they were four years ago. The recovery should have further to go. In this issue, I highlight one of the country’s largest regional banks. The bank has rapidly growing earnings and the stock price has momentum.
The economy is transforming.
The positive effects of tax cuts and deregulation are starting to take effect. There are also significantly cheaper oil prices, lower interest rates, and the absence of much of the tariff uncertainty from last year. The chances are good that 2026 will feature the strongest economy of the bull market so far.
Most cyclical businesses benefit from a stronger economy. In fact, cyclical stocks have been the best performing market sectors for the past few months. Bank stocks in particular are in a great position because of cheap valuations, rising earnings, and a likely steepening yield curve.
Banks took it on the chin during inflation and rising rates. Although bank stocks have recovered from the loss, they are still near the same price level they were four years ago. The recovery should have further to go. In this issue, I highlight one of the country’s largest regional banks. The bank has rapidly growing earnings and the stock price has momentum.
*Note: Your next issue of Cabot Profit Booster will arrive next Wednesday, January 21 due to the market holiday next Monday, January 20 in observance of Martin Luther King, Jr. Day.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
January has lived up to its billing so far, with lots of ups and downs among individual stocks and sectors based on a variety of news, rumors and, starting today, some Q4 pre-announcements linked to upcoming conference presentations. Even so, while the action is hectic, the underlying evidence is the same as it has been for the past few weeks: The intermediate-term trend of the major indexes is positive, not powerful, while for individual stocks and sectors, many are acting well, but it depends where you look. If we see a shift in the evidence, we’ll shift our stance, but until then, we’re leaving our Market Monitor at a level 7.
This week’s list is a potpourri of ideas from a variety of different areas that have come into favor this year. Our Top Pick is a solid growth story in the strong aerospace/defense area with big earnings coming. Shares boomed out of a base last week—try to enter on weakness.
This week’s list is a potpourri of ideas from a variety of different areas that have come into favor this year. Our Top Pick is a solid growth story in the strong aerospace/defense area with big earnings coming. Shares boomed out of a base last week—try to enter on weakness.
Landmines abound out there, especially as it relates to the Fed, with two inflation prints coming this week and the Department of Justice launching an investigation into Jerome Powell. And yet, volatility is low, stocks are near all-time highs, and another potentially strong earnings season gets underway this week. So, there’s reason for optimism, particularly given that growth stocks haven’t gone anywhere since late October. Small-cap stocks are starting to gain momentum, and today we add a Canadian one courtesy of Carl Delfeld, who last month recommended our newest portfolio addition to his Cabot Explorer audience.
Details inside.
Details inside.
*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, January 20 due to the market holiday next Monday, January 19 in observance of Martin Luther King, Jr. Day.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, January 20 due to the market holiday next Monday, January 19 in observance of Martin Luther King, Jr. Day.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
Updates
WHAT TO DO NOW: The market’s trends remain in good shape, though the broad market is still a bit iffy and growth stocks are up and down—though, encouragingly, we have seen some solid snapback action this week, with a few names we own and are watching re-testing resistance. All told, the plan remains the same: Give our names some rope and look to add exposure in names as they get going, all while being selective. Tonight, we’re placing AppLovin (APP) on Hold due to its news-driven air pocket, but we’re adding another 3% stake in Arista (ANET), which is perking up. Our cash position will be around 29%.
Third-quarter earnings season gets underway next week, and expectations are high. Economists are expecting 8% earnings growth among S&P 500 companies, according to data compiled by FactSet. It would be the eighth consecutive quarter of at least 8% profit growth among U.S. companies – perhaps the biggest reason stocks have been on a tear the last two years.
The S&P 500, Nasdaq and Russell 2000 are all up modestly compared to a week ago, while the S&P 600 is roughly flat.
Between the two small-cap indices, the Russell 2000 has been the stronger performer lately. It has a higher proportion of more speculative, lower quality stocks (i.e., those with lower or negative earnings), which have attracted more attention than the comparatively higher-quality (i.e., those with higher or positive earnings) stocks in the S&P 600 index.
Between the two small-cap indices, the Russell 2000 has been the stronger performer lately. It has a higher proportion of more speculative, lower quality stocks (i.e., those with lower or negative earnings), which have attracted more attention than the comparatively higher-quality (i.e., those with higher or positive earnings) stocks in the S&P 600 index.
While President Donald Trump hangs fire on rescheduling cannabis, we continue to get signs that support what I call the inexorable march towards greater acceptance of cannabis use and legal reform that will help public companies in the space.
We see momentum for cannabis acceptance and reform in: Ongoing federal-level evidence that Trump may actually follow through on his campaign promise to reschedule cannabis; ongoing robust state-level sales growth; opinion polls; and scientific evidence that cannabis has medical benefits.
We see momentum for cannabis acceptance and reform in: Ongoing federal-level evidence that Trump may actually follow through on his campaign promise to reschedule cannabis; ongoing robust state-level sales growth; opinion polls; and scientific evidence that cannabis has medical benefits.
What shutdown? What tariffs? The market couldn’t care less. It just keeps moving higher.
After making a series of new highs throughout the summer, the S&P had a great September. October looks good so far, too. Stocks are being driven higher by technology and the artificial intelligence trade. The technology sector is up 9% over the past month.
After making a series of new highs throughout the summer, the S&P had a great September. October looks good so far, too. Stocks are being driven higher by technology and the artificial intelligence trade. The technology sector is up 9% over the past month.
I was recently asked, “Why are there so few small-cap stocks in the Cabot Turnaround Letter portfolio?” That’s a fair question—a timely one at that—so I’ll address it here.
This week, about half of the Federal government shut down, causing stocks to waver and gold prices to spike due to uncertainty over how and when the budget duel might end. There are few winners in this tug-of-war scenario. This is not a good time for this showdown given weak business spending, a weak dollar, and weak job growth. The market normally takes these political fights in stride depending how long they last. Stay positive but cautious, and as always look for some profits to take off the table.
The market continues to hover near the high. The S&P is up over 13% year to date and about 38% from the April low.
The bull market continues to roll on. Stocks are hovering within bad-breath distance of the new high made just last week.
Why shouldn’t the market keep climbing? We are in a Fed rate-cutting cycle. There’s no sign of recession. And the artificial intelligence catalyst is driving projected earnings in the market’s largest sector into the stratosphere. It looks like stocks want to move higher and will continue to do so unless something pops up that makes them go down.
Why shouldn’t the market keep climbing? We are in a Fed rate-cutting cycle. There’s no sign of recession. And the artificial intelligence catalyst is driving projected earnings in the market’s largest sector into the stratosphere. It looks like stocks want to move higher and will continue to do so unless something pops up that makes them go down.
As the dividing line between the public and private sectors becomes increasingly blurred, it’s readily apparent that long-term investment decisions must now be evaluated through a new lens. And that means asking a simple question: “Could the financial asset I’m interested in acquiring be potentially influenced through direct federal intervention?”
WHAT TO DO NOW: Hold your dry powder for now. The elevated near-term risk for the market we had mentioned is beginning to play out, with the indexes pulling in, many stocks taking hits and, importantly, our Two-Second Indicator giving a warning sign. We’re not anxious to sell here, but we also want to see how this plays out given a couple of yellow flags that are out there. Tonight, we’ll stand pat with our good-sized (38%) cash position and will watch how things unfold.
We’re about to head into a crucial time of the year for small-cap stocks. That’s because the Q3 earnings season will fire up toward the end of October and run into early November.
This earnings season will let us know how small caps fared over the summer months and also give us a glimpse into how they’re expected to do in Q4 and the beginning of 2026.
Small caps have been outperforming large caps since the beginning of August.
This earnings season will let us know how small caps fared over the summer months and also give us a glimpse into how they’re expected to do in Q4 and the beginning of 2026.
Small caps have been outperforming large caps since the beginning of August.
Alerts
WHAT TO DO NOW: The news this past weekend that the U.S. and China have slashed tariffs sent the market soaring yesterday. Of course, there are still headwinds out there (Cabot Trend Lines not yet positive, relatively few new highs among growth stocks), and we wouldn’t be surprised to see a pullback now that the “good” news is out.
The broad market indices are up nicely today on news of significant de-escalation of U.S.-China trade tensions following weekend talks in Switzerland.
Natural Grocers (NGVC) should have a decent day (+20% in early hours trading) after Q2 earnings beat expectations. Revenue grew 9.0% to $335.8 million (a $6.1 million beat) while GAAP EPS of $0.56 grew by 60%. Daily average comparable store sales grew by 8.9%. This was a very strong quarter.
Shares of Artivion (AORT) are up over 12% today after the company beat expectations in the first quarter. Revenue grew 1.6% (Q1 of last year was a monster quarter so a tough comparison) to $99 million versus expectations of $94.8 million while adjusted EPS of $0.06 beat expectations by $0.02.
Enovix (ENVX) reported Q1 results yesterday after the close that met revenue expectations with $5.1 million. Operating expenses rose in the quarter and will continue to do so into Q2 to support the ramp up to mass production and to prepare for higher production capacity at the newly acquired South Korean battery manufacturing plant.
This has been a difficult month with high levels of uncertainty.
The concurrent declines in the U.S. dollar and S&P 500 are part of a trend that has swept markets since the broad and steep tariffs were announced.
The concurrent declines in the U.S. dollar and S&P 500 are part of a trend that has swept markets since the broad and steep tariffs were announced.
Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
Portfolios
Strategy
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 Top Ten 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 Top Ten features.