Issues
Jerome Powell was an unlikely hero to investors last week, reviving an increasingly sluggish market with his surprisingly dovish words from Jackson Hole last Friday. So stocks remain near record highs, and volatility is low, as the prospect of the Fed finally slashing interest rates again starting next month becomes increasingly realistic. Lower interest rates are particularly enticing for housing stocks, a beaten-down sector in the face of sky-high mortgage rates in recent years. So today, we add a high-profile homebuilder that’s starting to gather momentum – enough to catch the attention of Cabot Top Ten Trader Chief Analyst Mike Cintolo.
Details inside.
Details inside.
*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, September 2 due to the market holiday next Monday, September 1 in observance of Labor Day.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
*Note: Your next issue of Cabot Options Trader Pro will arrive next Tuesday, September 2 due to the market holiday next Monday, September 1 in observance of Labor Day.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
It’s been a highly unusual market environment, with the overall market grinding slightly higher, but with growth stocks generally under pressure as more leaders crack or test key support. We continue to think great things will happen when looking out a few months, but we also have to deal with the here and now and have been shedding names as they act abnormally, giving us a cash position north of 50%. We’d prefer to have that lower, but are holding it tonight, waiting for at least some support to show up before putting some of it back to work.
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.
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.
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.
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!
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.
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.
Updates
The S&P 600 Small Cap Index popped right back up this week after selling off and landing on its intersecting 50- and 25-day moving average lines last Friday.
Despite the holiday-shortened week, it feels like a lot has happened at the macro level since last Thursday’s update.
Despite the holiday-shortened week, it feels like a lot has happened at the macro level since last Thursday’s update.
Closely watched Nvidia (NVDA) reported its first-quarter earnings yesterday, beating expectations nicely on revenue despite restrictions on shipments of its H20 chips to China. The company posted revenue of $44.1 billion, up 69% from a year ago, but Nvidia expects to miss out on roughly $8 billion in sales of H20s to China in the second quarter.
Wall Street analysts expect stocks to be flat for the rest of the year. That’s according to a new Reuters poll, which surveyed 51 strategists, analysts, brokers and portfolio managers. Among them, the average year-end target for the S&P 500 was 5,900 – roughly in line with the current price, and essentially unmoved since the start of the year.
That’s not exactly exciting news, even if 5,900 would have felt like a win in early April, when the benchmark index dipped below 5,000 after President Trump’s now-infamous “Liberation Day” reciprocal tariff announcement. The rally since then has been impressive, but analysts aren’t confident we’ll get much more movement through the final seven months of the year.
That’s not exactly exciting news, even if 5,900 would have felt like a win in early April, when the benchmark index dipped below 5,000 after President Trump’s now-infamous “Liberation Day” reciprocal tariff announcement. The rally since then has been impressive, but analysts aren’t confident we’ll get much more movement through the final seven months of the year.
The market is looking good. Sure, it pulled back last week. But not by much. After the huge spike it had, the lack of a more significant pullback is encouraging. Stocks also started this week with a big up day on Tuesday.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Centuri Holdings (CTRI), GE Aerospace (GE), Intel (INTC), Pan American Silver (PAAS) and Paramount Global (PARA).
Intel (INTC) is reportedly mulling a sales of its network and edge businesses as part of an ongoing focus on streamlining the company.
Pan American Silver (PAAS) stands to benefit from recent gold-to-silver ratio readings.
Intel (INTC) is reportedly mulling a sales of its network and edge businesses as part of an ongoing focus on streamlining the company.
Pan American Silver (PAAS) stands to benefit from recent gold-to-silver ratio readings.
WHAT TO DO NOW: The market has pulled back a bit this week after a big recent run, but most things have taken the selling in stride. Further weakness can’t be ruled out, especially in the near-term but with the market digesting well and our intermediate-term indicators looking good, we have a few moves tonight. First, we’re going to sell our small position in Flutter (FLUT), but we’re also adding half-sized positions in Axon Enterprise (AXON) and ProShares S&P 500 Fund (SSO), the latter of which we’re averaging up in. We’re also placing Take-Two Interactive (TTWO) on Hold. Our cash position will still be around 47% after these moves.
The news cycle moves fast these days, as does the market’s reaction.
Last week, the big news was the 90-day ceasefire in the U.S. vs. China trade war. This week, it’s the passing of the reconciliation bill in the House and concerns over the deficit (the two are not unrelated).
Last week, the big news was the 90-day ceasefire in the U.S. vs. China trade war. This week, it’s the passing of the reconciliation bill in the House and concerns over the deficit (the two are not unrelated).
Retail stocks are having a rough year.
The S&P SPDR Retail ETF (XRT) is down 3.8% year to date, and consumer discretionary as a whole has been the worst performing of the 11 major S&P sectors. It makes sense. Tariffs threaten to hit U.S. retailers hardest, including the many companies that sell products like toys, child car seats, and sports apparel (such as our own Dick’s Sporting Goods (DKS)), most of which are made in places like China, Indonesia, Japan and Thailand – the places with the highest potential tariff rates. Combine that with escalating fears of a U.S. recession – also brought on by tariffs – and it could be a double whammy for retailers who don’t sell the essential everyday items that consumers buy regardless of the economic environment.
The S&P SPDR Retail ETF (XRT) is down 3.8% year to date, and consumer discretionary as a whole has been the worst performing of the 11 major S&P sectors. It makes sense. Tariffs threaten to hit U.S. retailers hardest, including the many companies that sell products like toys, child car seats, and sports apparel (such as our own Dick’s Sporting Goods (DKS)), most of which are made in places like China, Indonesia, Japan and Thailand – the places with the highest potential tariff rates. Combine that with escalating fears of a U.S. recession – also brought on by tariffs – and it could be a double whammy for retailers who don’t sell the essential everyday items that consumers buy regardless of the economic environment.
Last week was another up week for the S&P 500. The index has made up all the tariff Armageddon losses, it’s in positive territory YTD and is within 3% of the all-time high.
The market is flat so far this week. But after the big surge higher, it’s encouraging that the index isn’t pulling back. Perhaps stocks are consolidating a bit ahead of another move higher.
The market is flat so far this week. But after the big surge higher, it’s encouraging that the index isn’t pulling back. Perhaps stocks are consolidating a bit ahead of another move higher.
Last week was another up week for the S&P 500. The index has made up all the losses since April and is now in positive territory for the year.
After a multi-month barrage of relentlessly negative headlines, the S&P is within 3% of the all-time high. Seven of the eleven market sectors are higher YTD, and two of the negative sectors are down less than 1% for the year so far.
After a multi-month barrage of relentlessly negative headlines, the S&P is within 3% of the all-time high. Seven of the eleven market sectors are higher YTD, and two of the negative sectors are down less than 1% for the year so far.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Alcoa (AA), Centuri Holdings (CTRI), Dollar Tree (DLTR), GE Aerospace (GE), Intel (INTC), Pan American Silver (PAAS) and Toast Inc. (TOST).
Intel’s prospects hinge on the success of its 18A process node, which has the potential to be a major catalyst for its turnaround.
Intel’s prospects hinge on the success of its 18A process node, which has the potential to be a major catalyst for its turnaround.
The S&P 600 Small Cap Index rallied back to its March 25 levels early this week following weekend talks between China and the U.S. in Geneva, Switzerland. Those talks led to a 90-day ceasefire in the insane trade war between the two countries.
The latest news on trade is also positive, with supposed progress on talks between the U.S. and India, Korea and the EU. The market is a lot happier now that President Trump appears to be working to generate trade deals rather than destroy them.
The latest news on trade is also positive, with supposed progress on talks between the U.S. and India, Korea and the EU. The market is a lot happier now that President Trump appears to be working to generate trade deals rather than destroy them.
Alerts
WHAT TO DO NOW: The market remains resilient, but range bound, so we continue to go slow, with lots of hit-or-miss action out there. Happily, most of the Model Portfolio stocks are acting normally, though ahead of tonight’s update we’re going to make one small change—we’re going to sell one-third of what we have left in AppLovin (APP), which is up big again today after earnings, though it’s fading during the day. We’ll take some more profits off the table and hold the rest.
Shares of Peloton (PTON) are up double digits this morning after the company delivered a better-than-expected Q2 fiscal 2025 report before this morning’s opening bell. This is a turnaround story so take the numbers in that context. Management is working to curb costs and lay the groundwork for a return to growth, not trying to grow right now.
Sell Fortrea Holdings (FTRE); Buy Pan American Silver (PAAS)
A Tale of Two Earnings Reports: Atlassian (TEAM) and Vestis (VSTS)
DeepSeek: “Gift to the World” or Nightmare for U.S. AI Ambitions
WHAT TO DO NOW: The popular AI stocks were hit extremely hard today on fears that the CapEx spending boom could be cut short following the DeepSeek successes, which in turn dragged the major indexes lower. Outside of AI, the damage was reasonable, which is a plus, but with the major indexes still trending sideways and few stocks decisively moving higher, we’re remaining relatively cautious. In the Model Portfolio, we’re forced to quickly cut our loss in Marvell Tech (MRVL), which was caught up in the out-of-the-blue selling storm among AI stocks. Our cash position will now be around 53%.
Portfolios
Strategy
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.