The AI and Semiconductor potential reckoning that has gripped Wall Street all month came to a head last week as the biggest names in the group finally stepped up to report earnings, and the market’s response was brutal as many of these strong earnings reports were aggressively sold into. Throw in worries in the Middle East and the Bond Market and it turned out to be a bad setup for stocks. For the week, the Nasdaq bore the brunt with a drop of roughly 2.1%, while the S&P 500 slipped 0.6%, the Dow eased 0.4%, and the Russell 2000 fell 1.1%.

The AI and Semiconductor potential reckoning that has gripped Wall Street all month came to a head last week as the biggest names in the group finally stepped up to report earnings, and the market’s response was brutal as many of these strong earnings reports were aggressively sold into. Throw in worries in the Middle East and the Bond Market and it turned out to be a bad setup for stocks. For the week, the Nasdaq bore the brunt with a drop of roughly 2.1%, while the S&P 500 slipped 0.6%, the Dow eased 0.4%, and the Russell 2000 fell 1.1%.

The AI and Semiconductor potential reckoning that has gripped Wall Street all month came to a head last week as the biggest names in the group finally stepped up to report earnings, and the market’s response was brutal as many of these strong earnings reports were aggressively sold into. Throw in worries in the Middle East and the Bond Market and it turned out to be a bad setup for stocks. For the week, the Nasdaq bore the brunt with a drop of roughly 2.1%, while the S&P 500 slipped 0.6%, the Dow eased 0.4%, and the Russell 2000 fell 1.1%.

As growth investors, we continue to advise a cautious but flexible stance, as our neutral-to-negative growth-focused indicators and the weak action among many leading stocks has us holding lots of cash. That said, we’re really not that negative--most big-picture evidence is still positive, and our watch list is still full of stocks holding in normally while the market finds its way. We have no changes tonight, but are ready to pounce when our indicators give the go-ahead.

Before we dive into this week’s covered call idea we need to clean up a couple positions from the July expiration cycle. First off, FROG, BROS and SN expired for their full profits. However, SEDG and FLEX did not, leaving us with our stock positions which we will exit today.

To execute these trades, you need to:

Sell SEDG Stock

Sell FLEX Stock

Moving on …

The split tape condition we alluded to last week continues to hold sway, with a divergence of strength and weakness among the major sectors. While there are some encouraging signs among key groups—including financials, healthcare and cybersecurity—the primary evidence is still mixed, with cross-currents holding sway and some growth-y names looking for support. Accordingly, we’ll keep our Market Monitor at level 6.

This week’s list has a fair number of stocks that should be able to shake off—or even benefit from—the latest headwinds. Our Top Pick is showing solid momentum and has excellent potential with a promising healthcare franchise.

Midsummer market malaise drags on, but perhaps that will change in the coming weeks now that second-quarter earnings season is in full swing. And while air has certainly come out of the balloon of the AI trade of late, money has mostly rotated into sectors and names that either didn’t participate in or sharply trailed the massive market run-up in April and May. That includes today’s new addition to the Cabot Stock of the Week portfolio. It’s an undervalued healthcare name that I recommended to my Cabot Value Investor readers last month. So far, it’s looking like a smart buy-low choice, as the stock is starting to build momentum. And yet, shares remain undervalued – making it perfect for the current risk-off climate.

Details inside.

The semiconductor selloff went from a sector story to the market’s main event last week, as the Philadelphia Semiconductor Index (SOX) tumbled into a bear market — down 20% from its recent highs — while investors continued to question whether the enormous sums being poured into AI infrastructure will earn their keep. Adding to the drama, oil surged nearly 10% as the fragile U.S.-Iran ceasefire wobbled yet again. The encouraging news is that a cool June CPI report (inflation data) and strong results from the big banks kept money rotating — into energy, financials and consumer staples — rather than fleeing stocks altogether.

The semiconductor selloff went from a sector story to the market’s main event last week, as the Philadelphia Semiconductor Index (SOX) tumbled into a bear market — down 20% from its recent highs — while investors continued to question whether the enormous sums being poured into AI infrastructure will earn their keep. Adding to the drama, oil surged nearly 10% as the fragile U.S.-Iran ceasefire wobbled yet again. The encouraging news is that a cool June CPI report (inflation data) and strong results from the big banks kept money rotating — into energy, financials and consumer staples — rather than fleeing stocks altogether.

The semiconductor selloff went from a sector story to the market’s main event last week, as the Philadelphia Semiconductor Index (SOX) tumbled into a bear market — down 20% from its recent highs — while investors continued to question whether the enormous sums being poured into AI infrastructure will earn their keep. Adding to the drama, oil surged nearly 10% as the fragile U.S.-Iran ceasefire wobbled yet again. The encouraging news is that a cool June CPI report (inflation data) and strong results from the big banks kept money rotating — into energy, financials and consumer staples — rather than fleeing stocks altogether.

As I expected, SpaceX (SPCX) shares have fallen below their 135 IPO price, marking a significant decline from their initial highs above 200.

Earnings growth has accounted for more than 70% of the S&P 500’s total return since the 1990s, with the rest coming from dividends and changes in valuation. The five largest banks in the United States this week posted a combined $49 billion in profit for the last quarter, shattering records amidst increased investment in AI and a surge in related deals.

The July Issue of Cabot Early Opportunities focuses on three companies helping power some of today’s most important industrial growth markets – from aerospace and nuclear energy to infrastructure and specialty materials.

These businesses are benefiting from powerful long-term demand trends, yet all three remain far less followed than many of today’s market favorites. Recent pullbacks toward key moving averages have created attractive entry points as their growth stories continue to unfold.

All the details are inside this month’s Issue.

It’s not often that we discuss currencies in the Cabot Turnaround Letter, but given the persistent relative strength of the U.S. dollar right now, I think it’s imperative that we address it—mainly because of how it will likely impact our portfolio holdings going forward.

The top haven asset for the first half of 2026 wasn’t gold, U.S. Treasury bonds or the Japanese yen.

After spending much of the year leading the market higher, small caps have finally run into a little turbulence. Through midday today, the S&P 600 Index is down 1.8% from last Thursday’s close, roughly in line with the S&P 500’s 1.9% decline.

That said, it’s important to keep the recent pullback in perspective. Small caps remain the market’s clear leader in 2026, with the S&P 600 up 20.2% year to date versus an 8.1% gain for the S&P 500.

While flashier, more star-studded teams like Lionel Messi’s Argentina, Kylian Mbappe’s France and Erling Haaland’s Norway garnered most of the headlines at the just-completed World Cup, Spain was the best team. There was nothing flashy about Spain: no mega-stars, not a ton of goals, no relentless attack. Instead, they dominated the tournament with precision passing, immaculate ball control and near-impenetrable (just one goal allowed all tournament!) defense.

High-flying AI-related stocks are facing a high bar of performance. Even what normally would be considered staggering growth is met with a yawn. The backdrop of the Middle East conflict and almost $100 oil is not helpful.

The Philadelphia Semiconductor Index (SOX) has outperformed the S&P 500 by 57% this year, even after a sharp correction. This is basically a macro trade, and there are few industries as cyclical, or as capital-intensive, as semiconductor manufacturing.

The market rolls sideways amidst a slew of conflicting forces.

The S&P 500 has bounced around and is at the same level it was in the middle of May. The primary culprit is technology. That sector has been in a funk. The S&P 500 is hard-pressed to generate any lasting traction while this massive sector, accounting for over 40% of the index, flounders.

The market has gone sideways since May. It seems to be deciding what to do.

It’s encouraging that the resumption of hostilities with Iran has not sent the market lower. It’s also positive that oil prices aren’t rising back to the $100 level earlier in the war, although prices have risen. It’s also another earnings season and analysts expect a big one.

With war being one of the most dominant themes of the last four years, it stands to reason that investors should position their portfolios to account for this conspicuous (and unwelcome) trend.

And lest one be tempted to think that the warfare theme will diminish anytime soon, last week’s article by NPR deflates that illusion: It revealed that global military conflicts are at their highest level since WWII.

Price targets are standard practice on Wall Street. But sometimes, they can act as an artificial ceiling.

For example, say Truist sets a price target on an up-and-coming growth stock that’s 25% higher than its current share price. For a growth stock, a 25% return isn’t much. But then again, the stock could be a total flop, which is the natural boom-or-bust tradeoff growth investors must endure in trading off increased risk for massive upside. So, a price target on a growth stock seems almost like an unnecessary cap on a stock that has the potential to go through the roof.

WHAT TO DO NOW: Continue to trim your sails. In the Model Portfolio, we’ve been getting closer and closer to shore as growth funds and indexes are under pressure and AI stocks cascade lower. Tonight we’re going to further trim Marvell (MRVL) given its ugly action, selling a third of what we have left. That will leave the portfolio with a big 58% cash position. We could put some of that to work if growth names find support, but we want to see key growth measures firm up before buying.

After a brief pause last week, small caps are once again leading the pack.

Through Wednesday’s close, the S&P 600 Small Cap Index is up roughly 21% year to date, compared to gains of about 15% for the S&P 400 MidCap Index, 17% for the Nasdaq and 11% for the S&P 500.

Its earnings season again! That’s a good thing. Earnings just might save the day in an otherwise confusing and uncertain market.

The market is causing whiplash. The Iran peace deal changed things. Stocks held back by high oil prices, and the resulting higher inflation and interest rates, reignited as oil prices came back down after the peace deal. But hostilities with Iran have resumed.

The peace deal may be on hold again. But stocks are hanging in there so far.

The ceasefire with Iran is over and hostilities have resumed. That sounds like a bigger bummer than it’s been in the market so far. Falling oil prices enabled previously beleaguered stocks to soar higher again as the prognosis for inflation and interest rates simultaneously improved. But that rally is over if oil prices spike higher again.

The Investment Reporter has singled out CGI Group for its strong earnings growth over the last several months and expectations that the company will continue to do well in the near future.

CGI Group (GIB)
from The Investment Reporter

Key stock CGI Group is earning much more and is expected to earn even...

Today’s recommendation is an actively-managed ETF that offers broad market exposure but with a risk-reducing trick.

PowerShares S&P 500 Downside Hedged Portfolio (PHDG)
from Investors Digest of Canada

America is now in the throes of a long-term bull market, although the good times are not
without their risks. ... I believe investors should now...

Today’s pick is an NYSE-listed Canadian bank that boasts robust growth and strong diversification. The new recommendation is followed by a sell alert from Blue Chip Growth.

Bank of Nova Scotia (BNS)
from Personal Finance

Canada’s economy weathered the financial crisis in relatively strong shape. Consequently, this vast country has endured less of...

Sell Alert
Fomento Economico Mexicano (FMX)
from Blue Chip Growth, recommended at $109 in Investment Digest issue 735, dated January 23, 2013.

I recommend you sell Fomento Economico Mexicano (FMX) [now]. I was disappointed with this stock and looking to sell it on a bounce as it approached its next earnings announcement. And...

Today’s recommendation from Louis Navellier was chosen for its robust sales and earnings figures and even better estimates.

Ecolab (ECL)
from Louis Navellier’s Blue Chip Growth

My first pick for this month, Ecolab (ECL), has a squeaky clean reputation. What began as an onsite carpet cleaning business in 1923 has grown into a...

Today’s recommendation is an insurance company with a strong chart and shareholder-friendly policies.

American Financial Group (AFG)
from The Buyback Letter

American Financial Group is an insurance holding company based in Cincinnati, Ohio, with assets in excess of $35 billion. Through the operations of Great American Insurance Group, AFG sells property and casualty...

Capital One Financial (COF)
from Dow Theory Forecasts

Capital One Financial owes its genesis to a pair of management consultants who set out in the 1980s to tailor the credit card to the idiosyncrasies of its user. The plan went beyond identifying consumers who want kittens on their credit cards. Rather, the...

Sell
CF Industries (CF)
from Dow Theory Forecasts, recommended at $207 in the August 9, 2012 Daily Alert and in Investment Digest issue 725.

CF Industries is being removed from the Buy and Long-Term Buy lists. The stock looks cheap from nearly every angle in Quadrix but lacks the growth we prefer for...

Today’s recommendation is an investment management company stock that pays dividends and has good value and growth characteristics.

Invesco (IVZ)
from Argus Weekly Staff Report

We are reaffirming our BUY rating on Focus List selection Invesco Ltd. (IVZ) with a target price of $36. Invesco is among the largest independent investment management firms,...

The September decline so many investors were anticipating hasn’t materialized, but that doesn’t mean all seasonal bets are off. Today, the Stock Trader’s Almanac gurus recommend a seasonal trade on oil prices. The new recommendation is followed by an update on BofI Holding (BOFI).

ProShares UltraShort DJ-UBS Crude Oil (SCO)
from Stock...

Shares of BofI rallied nearly 6% today, fueled partly on news that the stock will be added to the S&P SmallCap 600 Index. BofI has surged 141% so far in 2013, helping push the bank’s market capitalization up to $923 million. Robust earnings and asset growth and improved credit quality have boosted...

Jacobs Engineering Group posted solid results for its fiscal third quarter ended June 28, 2013. The engineering, procurement and construction outfit generated net income of $108.9 million over this three-month period, up 9% from year-ago levels. Meanwhile, the company’s backlog increased by 10.2%, to $17.2 million.

Highlights from the fiscal third...

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.