Despite a frantic week of heavy sector rotation, the indexes managed to hang in there. Essentially, lofty tech valuations in the AI and growth spaces are now in question, and that hot money poured into defensive sectors. In the end, the S&P 500 eked out a +0.08% gain, the Dow rose +0.34%, and the Nasdaq Composite lost -0.45% last week.

Despite a frantic week of heavy sector rotation, the indexes managed to hang in there. Essentially, lofty tech valuations in the AI and growth spaces are now in question, and that hot money poured into defensive sectors. In the end, the S&P 500 eked out a +0.08% gain, the Dow rose +0.34%, and the Nasdaq Composite lost -0.45% last week.

The market’s evidence has clearly worsened the past two weeks and, really, there hasn’t been any money made in growth stocks since late September, when more names began to flash abnormal action and crack. We’ve mostly been selling in recent weeks, building up a big cash position of 56%, and tonight we’re hanging on to that as our Cabot Tides is on the fence, Two-Second Indicator is negative and many stocks are headed south. To be fair, the indexes are hanging in there and we still have many stocks we like (we write about some liquid biopsy stocks and other potential leaders in tonight’s issue), so we’re staying flexible--but right now it’s prudent to hold our cash and see how this selling wave plays out.

Hopefully, by the time you read this, the government shutdown will be over (at least for a couple of months). It’s about time! I was lucky on my trip to Florida a couple of weeks ago that I only sat on the tarmac for two hours, as things certainly have become much worse for travelers around the country since then.

Who knows if Congress will work out the kinks by January, but at least it’s some progress.

The market has been terrific. But uncertainty is growing, particularly with regard to the economy and artificial intelligence.

The government shutdown is over. Tariffs are increasingly less of an issue in the market. But the economy is about to take center stage. There haven’t been the usual economic reports during the shutdown and there is a risk that when they do finally come out the market could be startled.

At the same time, there has been a tug-o-war regarding the AI trade, and Wall Street doesn’t know what to think. AI has driven the market higher for most of the last three years. The future direction of AI and technology will determine the future direction of the overall market.

Fortunately, there are trends and stocks that are not overly dependent on the unpredictable technology sector or the state of the economy. Electricity demand is soaring because of artificial intelligence data centers, electric vehicles, and manufacturing onshoring. The best health care companies will thrive with the enormous tailwind of the aging population megatrend.

Electricity demand will boom, and people will get sick and need medicine regardless of the near-term gyrations of the economy or the market. In uncertain times like this, I like to go with bankable trends.

In this issue, I highlight two of the very best stocks to buy in the areas of utilities and health care.

Despite a promising start, last week turned into a rough one for the market. A mix of rising economic uncertainty and heavy tech-valuation concerns weighed on sentiment, driving the market to a risk-off environment. By week’s end the S&P 500 had fallen 1.6%, the Dow Jones had slid 1.2%, and the Nasdaq Composite had dropped 3%.

On balance, there’s little doubt the evidence worsened last week, and yet, most leaders didn’t crack, and the big-cap indexes didn’t either, so the question was whether a “real” correction was getting underway … or this would be yet another shakeout-type decline that gives way to higher prices. So far, of course, it’s looking like the latter. On Friday’s update, we dropped our Market Monitor to a level 6, but we’re going to quickly change course and go back to 7 today—and then stay flexible as we see whether a year-end run is getting underway or whether more volatility is coming.

This week’s list again has a growth tilt to it, which we find encouraging given the selling we saw in many areas of the market of late. Our Top Pick is a steadier leader in the AI (and solar) space and is testing its 10-week line for the first time—look to enter on strength and use a tight-ish percentage stop.

The market took a few lumps last week but is recovering nicely today. We’ll see which direction it goes from here now that third-quarter earnings season is winding down. Yet again, earnings did more help than harm, providing a floor for stocks to help counteract some of the unfavorable headwinds (high valuations, record-long government shutdown, accelerating job cuts by major corporations) threatening to derail them. Today, we add one of the bigger earnings season winners, a mid-cap biotech that has been beaten up for a couple years but is staging a comeback that got a welcome boost from its late-October report. It’s a stock that got Mike Cintolo’s attention in Cabot Top Ten Trader.

Details inside.

Despite a promising start, last week turned into a rough one for the market. A mix of rising economic uncertainty and heavy tech-valuation concerns weighed on sentiment, driving the market to a risk-off environment. By week’s end the S&P 500 had fallen 1.6%, the Dow Jones had slid 1.2%, and the Nasdaq Composite had dropped 3%.

Despite a promising start, last week turned into a rough one for the market. A mix of rising economic uncertainty and heavy tech-valuation concerns weighed on sentiment, driving the market to a risk-off environment. By week’s end the S&P 500 had fallen 1.6%, the Dow Jones had slid 1.2%, and the Nasdaq Composite had dropped 3%.

Nuclear energy is a $2 trillion industry waiting to explode. And while some of the bigger-name providers of it have seen their share prices rise manyfold over the last year, other companies that provide nuclear power have remained under the radar – and undervalued.

That includes this month’s new addition. It’s a California utility company that’s one of the largest electricity providers in the country – and it has a nuclear plant that’s starting to get into the (you guessed it) artificial intelligence game.

Details inside.

Today we’re taking a half-sized position in an emerging MedTech company disrupting the insulin market. It has developed a fully automated device that removes many of the headaches associated with insulin pumps, which have kept adoption of those systems in check.

It’s a rapid-growth company with one product already approved by the FDA, and more solutions in the pipeline.

All the details are inside the November Issue of Cabot Small-Cap Confidential.

WHAT TO DO NOW: The market is still singing a similar tune, with the big-cap indexes looking fine (and, now, some broader indexes looking better), but growth stocks remain tricky, with many names marking time and more looking iffy. In a special bulletin yesterday, we took partial profits in GE Aerospace (GE), and tonight we are moving Rubrik (RBRK) back to Hold as it’s been unable to escape the weak sector action. That will leave us with 43% cash, which we’ll sit with for now, though we could put some to work in some of our strong performers if growth stocks can perk up.

There were a lot of headlines over the last couple of days about the emerging small-cap rally.

That’s because small caps surged on both Tuesday and Wednesday after a somewhat cool CPI inflation report drove expectations for a 25bps September rate cut to 99%.

On Wednesday, the S&P 600 SmallCap Index jumped 2.0%, trouncing the 0.3% rise in the S&P 500 Index.

Unlike Rodney Dangerfield, cannabis stocks continue to get some respect. They are up 66% since I last suggested them here on July 30, using the AdvisorShares Pure U.S. Cannabis (MSOS) as a guide. In the past month, the sector is up 72%.

The reason: We continue to get high-profile confirmations that the administration of President Donald Trump will reschedule cannabis. This really isn’t news. I’ve been saying this since Trump promised rescheduling in his election campaign a year ago. But mainstream media attention is drawing money into the sector.

The market is still right near the high. But the dog days of summer are setting in.

Stocks are resilient. News regarding tariffs and the economy got better and then got worse. The market is taking it in stride and meandering near the high. Now we are at that time of year when investors focus on squeezing in the last bit of summer fun.

Last week’s release of the latest job market outlook did more than shock the market; it reopened a debate that has been intermittently raging over the last couple of years, namely: will the U.S. dodge an inflationary recession (i.e., stagflation)?

Super Micro Computer (SMCI) stock sank more than 19% yesterday after the troubled AI server maker’s results underperformed Wall Street’s expectations.

Super Micro reported adjusted earnings per share of $0.41 for its 2025 fiscal fourth quarter, less than the $0.44 expected by Wall Street analysts, according to Bloomberg consensus estimates. Its quarterly revenue of $5.76 billion was below the $6 billion expected, while its roughly $551 million gross profit for the period fell a little short of the estimated $601 million.

The resilient summer market got a cold slap in the face last week. There was a big recovery on Monday. But the market still looks wobblier than it did a week ago.

One day’s headlines seemed to undo the positive market narrative.

Stocks are recovering so far this week after a big selloff on Friday.

The sweet summer market that had consistently set new highs got a cold slap in the face last week. But trading so far this week indicates it might not be a game-changer.

The market was looking good a week ago. The huge trade deal with Europe alleviated much uncertainty about tariffs. Second-quarter GDP came in at a much stronger-than-expected 3%. Tariff uncertainty was fading away, and the economy was stronger than expected. But then news of a much worse-than-expected job number for July, along with significant downward revisions for the prior two months, combined with increasing tariff threats to China, India, and Canada and shattered the positive narrative.

With the current earnings season more than halfway complete for S&P 500 companies, a clearer picture of the overall corporate health backdrop is beginning to emerge.

WHAT TO DO NOW: Remain bullish, but continue to keep some of your powder dry. The market remains in a solid uptrend, but more indexes and stocks have been stalling out. To be fair, we are seeing some growth names finally kick into gear, but we still think it’s best to ease off the accelerator a bit as we see how earnings season goes. In the Model Portfolio, we sold Uber (UBER) and bought a half-sized stake in Oracle (ORCL) on a special bulletin Tuesday; tonight we’ll make one small move, adding another 3% position to Rubrik (RBRK), which appears to be emerging from its slumber. We’ll still hold around 30% cash after these moves.

The big macro news this week is that the U.S. economy is doing well and there’s no really clear reason for the Fed to cut interest rates. Trade deals continue to be announced, and the U.S. should be bringing in a good deal more money due to tariffs than it has in the recent past.

Real GDP was just announced to have risen 3%, thanks to capex on hardware and software to build out data centers. Results from Microsoft (MSFT) and Meta (META) confirmed this trend.

A surprisingly productive July comes to a close with the market near all-time highs and volatility at a relative low. I’ve written in recent weeks about the reasons that could change in August and September – the highest stock valuations since the February high, lingering tariff uncertainty and its potential impact on a heretofore resilient economy, frothy warning signs like new meme stocks and soaring bitcoin prices, and the usual selling that occurs right after Labor Day. But for now, stocks are doing just fine, and that includes value stocks, which have risen more than 6% year to date.

Buy Second Half Reddit (RDDT)

It’s been a pretty ugly stretch lately, with numerous crashes in a number of growthy names. I’m far from confident that the selling is over, however, history has shown that a little buying when things seem bleak can pay off.

As I mentioned in this week’s update, CEG has some technical support around the $225 per share range. The stock had been flying high but has been under considerable pressure recently. CEG (currently around $227 per share) is down over 35% from the high made in late January.

Please sell our Recursion Pharmaceuticals (RXRX) recommendation, as after a strong start the stock has pulled back sharply.

Take Profit in Starbucks (SBUX); Sell American Airlines (AAL)

Sell Astera Labs (ALAB) and Cellebrite (CLBT)

FTAI Infrastructure (FIP), AvePoint (AVPT), Docebo (DCBO), Alkami (ALKT)

WHAT TO DO NOW: Remain defensive as the ferocious selling in growth stocks continues. Today’s bulletin concerns Duolingo (DUOL), which reported a fine quarter and better-than-expected outlook—but the stock is cracking nevertheless. We’ll cut bait here, leaving us with around 72% in cash.

FTAI Aviation (FTAI) Reports

WHAT TO DO NOW: While we’re not aiming to sell wholesale given our large cash position (60% coming into this week), today we’re going to sell the remaining portion of our stake in AppLovin (APP), which is being mauled by a couple of short reports today. We had already sold the vast majority of our stake, but today we’ll sell the rest and hold the cash. Details on that (and other stocks) below.

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.