A strong earnings season has propelled the broad market to fresh highs, and as we enter mid-August, “rotation” has become the buzzword of the moment.

We’ll respect this action by not pressing too hard on the gas today. But at the same time, with a number of attractive setups floating across my screen, we’re not going to be wildly conservative.

We step up to the plate and take a swing at three new positions today.

Led higher by the Russell 2000 (IWM), which gained 3% on the week, the leading indexes saw extreme rotation but closed the week higher as the S&P 500 rose by 1%, the Dow added 1.7%, and the Nasdaq gained 0.8%.

As we roll toward Labor Day, it’s pretty much the same story when it comes to the market: Most of the evidence is at least leaning positive and we see many recent positive earnings reactions, which is a plus—but there also remain many crosscurrents out there, with plenty of selling on strength as many sectors chop sideways. We’re sticking with the same stance—holding our strong performers, but tightening stops on names that wobble and being selective on the buy side, aiming for strong entry points in case more air pockets emerge. We’ll once again leave our Market Monitor at a level 7.

This week’s list was affected by last week’s rotation, but our Top Pick is a name that had a big run but has now dipped in an orderly fashion for the past month.

Stocks inched further into record territory this week. And while there’s another big news event to weather this week (the Fed’s Jackson Hole meeting and Jerome Powell press conference), the market has already motored ahead in the face of a bad July jobs report and escalating inflation. The real test is likely to come in September, historically the worst month for stocks as Wall Street returns from its summer vacation and sells off its laggards. So today, we add a bit of safety in the form of a low-beta, high-yield utility courtesy of Cabot Dividend Investor Chief Analyst Tom Hutchinson. But this utility acts more like a growth stock, thanks to AI and data center buildouts.

Details inside.

Led higher by the Russell 2000 (IWM), which gained 3% on the week, the leading indexes saw extreme rotation, but closed the week higher as the S&P 500 rose by 1%, the Dow added 1.7%, and the Nasdaq gained 0.8%.

Led higher by the Russell 2000 (IWM), which gained 3% on the week, the leading indexes saw extreme rotation, but closed the week higher as the S&P 500 rose by 1%, the Dow added 1.7%, and the Nasdaq gained 0.8%.

All in all, not a bad month. The stock markets had a nice bounce. The unemployment rate held steady at 4.2%; productivity increased (by 2.4%), higher than economists expected; and while home prices continued to rise in certain areas of the country (Northeast and Midwest), nationwide, they fell by 4.9%, to $401,800, on average.

And best of all, the turmoil regarding tariffs doesn’t seem to be affecting earnings much.

FactSet reported that, so far, 90% of S&P 500 companies have announced second-quarter earnings, and 81% have reported a positive EPS surprise and a positive revenue surprise.

That gives us an 11.8% earnings growth year over year—not bad!

This was a great week for Explorer stocks.

Coeur Mining (CDE) shares were up 19.6% this week following last week’s 13% gain after quarterly revenue was up 117% year over year. Dutch Bros (BROS) shares were up 16.9% this week. Sea Limited (SE) shares were up 17.3% this week following net income in the second quarter increasing by more than fivefold to $414 million.

Artificial intelligence is a massive catalyst that is changing the market. It is spreading beyond technology and transforming other industries.

Utilities are companies that provide water, energy, and electricity to homes and businesses. They operate monopolies or near monopolies in their areas and the rates they charge are usually determined by regulatory bodies.

They usually pay strong dividend yields and provide highly defensive earnings that continue in any kind of economy. But, aside from the dividend and defensive characteristics, they’ve typically offered little else. Good stocks tend to outperform the indexes in flat or down markets and underperform them in bull markets. They are the market sector that most closely resembles bonds.

But skyrocketing electricity demand, mostly from data centers supporting AI, is changing that sector for the better. The phenomenon is making electric utilities growth businesses as well. The changing environment is adding another hugely positive dimension to these underrated stocks.

In this issue, I identify a beneficiary of that positive change that’s ahead of the pack. It’s an opportunity that has never existed before in modern times. The combination of defense and growth is the best of both worlds.

Led higher by major tech stocks (and especially AAPL), the Nasdaq gained nearly 4% last week, closing at a new record high. Less impressive were the other leading indexes, though their gains were very positive as well, as the S&P 500 added 2.4%, while the Dow rallied 1.3%.

The big-cap indexes remain in an uptrend, but it’s still a tricky and narrow environment, with just about every other index making no progress (net-net) for the past few weeks while they test their key 50-day moving averages. That means the intermediate-term trend is on the fence, which is obviously something that bears watching. On the positive side of the ledger, though, we’re still encouraged by what we’re seeing during earnings season, with many signs of strength from growth-y titles. All in all, we’re sticking with the stance we’ve been in—our Market Monitor remains at a level 7.

This week’s list has something for everyone, with strength seen in a variety of sectors. Our Top Pick just broke out of a beautiful launching pad after earnings, with some others in the general group also doing well.

The major indexes continue to march higher, but trouble is brewing under the surface. That’s been reflected by the number of earnings blowups of late, including in many stocks of companies that beat estimates. Our portfolio was not immune to that phenomenon last week, and as a result, we’re doing some late-summer housecleaning this week, selling four positions that have been lagging and got worse after reporting earnings. Meanwhile, with technology stocks becoming a bit overcooked, today we add to our portfolio a manufacturing name that makes essential real-world products that are always in high demand. It’s a stock whose shares have been building momentum – enough to attract the attention of Cabot Top Ten Trader Chief Analyst Mike Cintolo.

Details inside.

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), Centuri Holdings (CTRI), Intel (INTC), Kenvue (KVUE), Paramount Global (PARA) and SLB Ltd. (SLB).

Alcoa (AA) is navigating tariff-related challenges relating to aluminum pricing and sourcing.

SLB Ltd. (SLB) is well positioned to benefit from anticipated oil and natural gas price increases arising from the Iran/Israel conflict.

NOTE: We’re publishing this update a day early as our offices (along with the overall market) will be closed tomorrow for Juneteenth.

WHAT TO DO NOW: Continue to lean bullish but stand pat for now. Overall, the market is handling the Middle East uncertainties well, with the major indexes and most stocks holding up well and most of the intermediate-term evidence in good shape. Still, with most stocks and indexes in holding patterns, we’ll follow along tonight—holding our 28% cash position and our current positions as we wait to see if more stocks can eventually lift out of their recent tight ranges.

Tuesday’s edition of The New York Times had a stock-centric article titled, “The S&P is Nearing a Record. Really.” The subtext, of course, is that stocks have climbed near February all-time highs despite a bevy of geopolitical tensions, potential economic landmines, and widespread investor and consumer pessimism. As I wrote last week, the market has fully recovered from its tariff-fueled cratering of late March and early April, but lingering uncertainties threaten to derail it at any moment … and that was before Israel and Iran started bombing each other.

There really isn’t a lot to complain about. But I’ll try.

The S&P 500 spiked about 25% from the low of early April. The index is now up around 2% YTD, up 1.5% in June, and is just 2% from the all-time high. That’s great in terms of coming off the precipice of a bear market. But a 2% YTD return halfway through June isn’t exactly lighting it on fire.

With the stock market and Cabot’s office closed tomorrow for the Juneteenth federal holiday, this week’s update is coming your way a day early.

The market’s biggest concern at the moment is, of course, the conflict between Israel and Iran. I think it’s impressive how resilient the market has been given these developments in the Middle East.

The market has been bouncy in recent days but is still close to the high. Prices are high, but uncertainty is growing.

Stocks sold off on Friday as Israel and Iran exchanged bombings. But the market rose on Monday as investors are expecting a quick end to the conflict. Anything can happen. The conflict adds another degree of uncertainty beyond the tariffs and the economy.

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Dollar Tree (DLTR), GE Aerospace (GE), Goodyear Tire & Rubber (GT), Intel (INTC), Paramount Global (PARA), SLB Ltd. (SLB) and UiPath (PATH).

Agnico Eagle (AEM) is poised to benefit from a major change in the balance of global reserve assets.

The S&P 600 SmallCap Index hit a multi-week high on Tuesday before giving a little back yesterday.

There’s some interesting data that suggests small-cap stocks could be in for a run starting now.

According to data from Evercore ISI, small-cap stocks have done better than large caps 60% of the time in June, dating back to 1990. The odds are even better when small caps enter June underperforming, as they have for a while now.

What a difference two months make!

On April 8, the Nasdaq had plummeted to bear market territory after touching all-time highs just six weeks earlier, and the S&P 500 was on the cusp of joining it. Small caps were faring even worse. Volatility had spiked to multi-year highs. And everyone was certain a recession or high inflation – or both – were imminent.

The reason was tariffs. “Liberation Day,” a week earlier, on which President Donald Trump had imposed sky-high tariffs on more than 100 U.S. trading partners from all over the world, had sent stocks plummeting as economists clutched their pearls and warned of imminent collapse.

Cannabis companies remain in hunker-down mode as challenges persist. Those include price compression, competition from hemp-based THC product sales, and uncertainty about potential federal reform.

Not all cannabis companies are going to survive. Ayr Wellness (AYRWF) looks like it is about to go under. I’ve only ever kept a very small position in that name, so the company’s demise did not cause too much damage.

After bouncing around for a few weeks, the S&P is moving higher again. The index is now just about 2% below the high and may rally this month.

The tariff story continues to play out. The market made a huge recovery after the initial fears in April as investors wrote off a disaster scenario. Now, talks are dragging on, and the market still can’t move completely past the issue. But good economic news was a pleasant surprise.

We are all trying to digest the substance of “Liberation Day” and better understand what lasting impact it will have on global trade, the market, stocks that we own and those we are considering buying.

We are all trying to digest the substance of “Liberation Day” and better understand what lasting impact it will have. Suffice to say, there are a lot of ways this could go. But one thing is for sure – we’re in uncharted territory.

Soleno Pharma (SLNO) Pops 40% on FDA Approval

Just a quick reminder that, as per last week’s Special Bulletin, the March Issue of Cabot Early Opportunities will be published next Wednesday, March 26. Among the reasons for pushing the Issue back a week is that it will allow time for new portfolio additions to reflect today’s Fed decision to hold rates steady and the updated Summary of Economic projections (SEP), which implies a total of two 25-basis-point cuts this year.

Insiders at two of our Cabot Cannabis Plus Insider Portfolio names just made large purchases of their company’s stocks. Besides cannabis, I have followed insider activity overall for a few decades. These are significant buy signals, in my experience.

This Market. March Issue Moved to the 26^th

WHAT TO DO NOW: The growth stock meltdown continues, with the major indexes and individual names under heavy pressure again today. Already with nearly 80% in cash, we’re not eager to sell wholesale in the Model Portfolio, but we also won’t just hold and hope. Today, we’re going to sell half our position in Flutter (FLUT), which has fallen sharply this week. We’ll hold the rest of our names as well as our 84% cash hoard.

Sell Reddit (RDDT) and Second Half of FTAI Aviation (FTAI)

LandBridge (LB) Reports

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.