What started as another very bullish week for stocks turned into a bit of a mess on Friday as a confluence of negative items hit the market. First it was Broadcom (AVGO), Ciena (CIEN) and CrowdStrike (CRWD), all of which saw their stocks fall following earnings Wednesday afternoon, then a stronger-than-expected May jobs report sent Treasury yields surging, and finally leading AI play Anthropic put out a thought piece that recommended the speed of AI development should slow down a bit. The result was the Nasdaq’s worst single session since April 2025.

What started as another very bullish week for stocks turned into a bit of a mess on Friday as a confluence of negative items hit the market. First it was Broadcom (AVGO), Ciena (CIEN) and CrowdStrike (CRWD), all of which saw their stocks fall following earnings Wednesday afternoon, then a stronger-than-expected May jobs report sent Treasury yields surging, and finally, leading AI play Anthropic put out a thought piece that recommended the speed of AI development should slow down a bit. The result was the Nasdaq’s worst single session since April 2025.

Friday saw the sellers finally make a stand, with a huge, broad decline, focused mostly on the highest-fliers but hitting most everything. Nothing has changed with the intermediate-term evidence, which remains bullish, but near term, we do think the onus is on the bulls to step up, given Friday’s huge wave of selling and some iffy action among a small-but-growing number of leaders. All told, we’re bullish, but the odds are increasing that the market and some names may need to digest for a while. We’ll pull our Market Monitor down a notch to a level 7.

This week’s list has a bunch of attractive names despite the market’s selloff. Our Top Pick is a solid consumer-oriented story that’s producing quick and reliable growth, and the stock has tightened up nicely of late.

Stocks finally encountered their first real turbulence since March, with several of the major indexes having their worst day all year on Friday, thanks to soaring interest rate-hike odds in the wake of a better-than-expected jobs report (down is up sometimes on Wall Street!). Today’s bounce-back is encouraging, but there may be some more choppiness ahead given the strength of the rally in April and May. So today we add a measure of safety to the portfolio in the form of a well-known commodity play – but one that has enough momentum that it caught the eye of Mike Cintolo in his Cabot Top Ten Trader momentum-investing advisory last week.

Details inside.

Artificial intelligence has moved past the experimentation phase and is being rapidly deployed at scale, forcing companies to rethink how their IT infrastructure actually handles data flow.

Today’s company sits at the intersection of network performance and protection, helping the world’s largest organizations manage this new wave of traffic, while also maintaining reliability. Its networking platform is becoming increasingly critical as AI workloads scale.

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

Healthcare is a universal need. It’s also a growing one.

The aging of the U.S. population is such that healthcare spending is expected to make up 20% of total economic spending by 2033. And yet, healthcare stocks are having a rough year, retreating more than 10% since the Iran war began. The evergreen nature of the sector (everyone needs healthcare!) means that it rarely stays down for long, and it appears a bottom has already been put in. That spells opportunity!

So today, we add a big-name healthcare stock to our portfolio that does 90% of its business in the U.S. Trading nearly 30% off its February highs, it’s a bargain right now – and one that has grown sales and earnings by double digits the last three years.

Details inside.

AI stocks are a little unsettled as Broadcom (AVGO), the sixth-most valuable stock in the S&P 500, fell short of revenue expectations, and the stock looks like it is going to open weakly and have a tough day. Bitcoin is in a slump, down about 25% this year and having lost about half of its value since reaching a peak above $126,000 in early October.

The market is also getting impatient with the on-and-off Hormuz story as energy stockpiles dwindle and oil prices react to the daily news cycle.

The bulls made it nine straight winning weeks, though the holiday-shortened four-day stretch (markets were closed Monday for Memorial Day) required a burst of earnings firepower to keep the streak alive. Dell Technologies (DELL) and Snowflake (SNOW) both posted blowout results, sparking sympathy rallies across AI-adjacent tech names and giving software stocks in particular a much-needed shot in the arm.

Overall, nothing has changed when looking at the big picture of the market and leadership—that said, we are seeing a bunch of extended, hot names begin to take on a little water, and we’ve even seen a few names that have had long runs flash some intermediate-term iffy action. That’s not a death knell, but it’s a reminder to continue trailing stops, and for new buying, focus on either powerful, fresh breakouts or leaders that pull in to higher-odds points. We’ll leave our Market Monitor at a level 8 this week.

This week’s list has something for everyone, though after highlighting a few zingers of late, this week’s Top Pick is on the cyclical side of things, with shares emerging from a multi-month rest period.

Stocks are at record highs, but after two straight months of relentless gains, a pullback of some sort – at least in the short term – seems likely. Still, not every sector is stretched to the moon, and that includes biotech. Cabot Early Opportunities Chief Analyst Tyler Laundon recently uncovered a fast-growing biotech that looks primed for a big run, so today we add this intriguing name to our portfolio.

Details inside.

The bulls made it nine straight winning weeks, though the holiday-shortened four-day stretch (markets were closed Monday for Memorial Day) required a burst of earnings firepower to keep the streak alive. Dell Technologies (DELL) and Snowflake (SNOW) both posted blowout results, sparking sympathy rallies across AI-adjacent tech names and giving software stocks in particular a much-needed shot in the arm — the IGV, which we own, broke decisively above its 200-day moving average for the first time this year on Friday.

The bulls made it nine straight winning weeks, though the holiday-shortened four-day stretch (markets were closed Monday for Memorial Day) required a burst of earnings firepower to keep the streak alive. Dell Technologies (DELL) and Snowflake (SNOW) both posted blowout results, sparking sympathy rallies across AI-adjacent tech names and giving software stocks in particular a much-needed shot in the arm — the IGV, which we own, broke decisively above its 200-day moving average for the first time this year on Friday.

This week’s Memorial Day observance marked the traditional onset of the summer vacation season for millions of Americans. It’s a time of traveling, sightseeing, picnics and parties. It’s also the peak season for enjoying cold, carbonated beverages like soda pop and energy drinks.

With this dynamic in play, I think it’s time that we give some attention to our holding in PepsiCo (PEP), which is entering a critical period of its sales year.

On the heels of a miserable March and a euphoric April, I wrote several weeks ago in this space that I thought May would determine which direction the market is truly headed, at least in the intermediate term. We have our answer, and it’s a definitive “up.”

All three major U.S. indexes are touching record highs as of this writing, with the S&P 500 up 4.3% in May, the Nasdaq up 7%, and the slower-moving Dow Jones Industrial inching higher by 1.6%. That’s despite the ongoing Iran war and the accompanying sky-high oil and gas prices, escalating inflation, bond yields at multi-year highs, possible Fed rate hikes later this year, and record-low consumer sentiment.

Stocks have largely shrugged off this week’s dust‑ups in the Middle East as investors continue to bet on a near‑term memorandum of understanding (MOU) that would reopen the Strait of Hormuz and push bigger sticking points between the U.S. and Iran down the road.

Yields have cooled off this week and continue to do so this morning, thanks to a slightly lower‑than‑expected core PCE reading. April core PCE rose 0.2% month over month, below both March’s 0.3% reading and consensus, giving the Fed some breathing room as policymakers weigh the competing forces of inflation and growth.

The $145 trillion global bond market is under some stress due to runaway debt. The 30-year U.S. Treasury bond yielded over 5% last week, up from 4.63% at the end of February. Americans are struggling to keep up with their debt payments, as the cost of borrowing money increases. This is a global story. In Japan, the 30-year government bond yield just hit a record of 4.15%, and U.K. government debt jumped to 5.85% earlier this month.

Nothing stops this market. The S&P 500 hit another new high this week.

The spectacular earnings season helped power the rally. Average earnings growth on the S&P 500 is over 28% in the first quarter. That is far better than the expected 13.1% and the highest level of growth for any quarter since 2021.

We’ve all seen it before: the owner of a home in dire need of structural repair decides to “flip” the house for a quick profit by contracting a restoration service. Instead of making sorely needed foundational repairs, the cleanup crew focuses on superficial fixes like painting, tiling, flooring, etc., in hopes that a shiny new veneer will hide the problems that exist beneath the home’s exterior.

Crude though the analogy may be, I think it’s an apt description of what we sometimes encounter as turnaround investors.

WHAT TO DO NOW: The market and especially most leaders have finally shaken out a bit in recent days, and there are some worries we’re watching, including the rise in Treasury rates and the health of the broad market (our Two-Second Indicator is now negative). Even so, the primary evidence remains in good shape, and while this rest phase could easily take longer if the worries persist, the odds favor higher prices down the road. Tonight we’re making one small move: Averaging up on Axsome Therapeutics (AXSM), buying another 3% position. Our cash position will be around 34%, which we’ll be looking to put to work should the market continue to act properly.

The war in Iran has not sunk the stock market the way it appeared it might in March, nor has it put a dent in the U.S. economy (yet), with first-quarter earnings growth among U.S. large caps coming in at 27.7%, a five-year high. But the bond market has been profoundly impacted, with yields on the 10-year Treasury up 17% since late February to top 4.6% for the first time in a year. Even more troubling? Yields on the 30-year note are now north of 5% for the first time since 2007.

Small-cap stocks have taken a very small step back this week, with the S&P 600 down less than 1% from last Wednesday’s close. The index remains up roughly 12.5% year to date. The S&P 500 is also down less than 1% over the past week and is up roughly 8.5% so far this year.

The rally could be in jeopardy. The ongoing situation in Iran is causing a spike in oil prices and interest rates that is worrying investors.

There was war bluster over the weekend as peace efforts stalled and President Trump threatened renewed strikes on the country. Since then, a host of Arab nations have claimed Iran is submitting a new and more serious peace proposal. We’ll see what happens. But there still isn’t any relief in oil prices or interest rates.

The rally could be in jeopardy. Despite the S&P hitting a new high last Thursday, stocks are off to a rocky start this week as the Iran war threatens to heat up again.

Peace negotiations don’t seem to be going anywhere, and President Trump threatened renewed strikes on the country over the weekend. The price per barrel of Brent Crude Oil again moved above $110, prompting fears of inflation and a spike in the 10-year Treasury rate to 4.6%, the highest level in a year.

It’s a minor development and certainly not yet significant enough to warrant serious concern, but the first small cracks in the financial market’s liquidity profile have begun to show.

The market’s hyper-abundant liquidity we’ve discussed in recent weeks and months is still, in my estimation, strong enough to keep the major averages buoyant. But the “all-clear” nature of the heretofore strong market environment has given way to a few signs of potential trouble on the distant horizon, which bears watching.

BBIO and WFRD to SELL. FROG to HOLD

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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.

I plan on locking in returns on several of our current positions and immediately selling more premium. In addition, I plan to add at least one more stock to the portfolio, which will bring our total to seven stocks. I also intend on continuing to ladder our positions in perpetuity, so we are collecting premium on a weekly basis. As it stands, we have positions due to expire over the next four consecutive weeks.



Other than that, there really isn’t much to say at the moment. We continue to be pleased with the overall mechanics of our approach and more importantly the overall return, which currently stands at 145.7%.

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Cabot Stock of the Week is a great way to build a diversified portfolio of the top growth, undervalued, momentum, international, dividend and small-cap stocks selected for current market conditions from seven Cabot investment advisories.