Search

It was a relatively quiet day on Wall Street, with the major indexes staying mostly range bound. At day’s end, the Dow up 19 points and the Nasdaq up 27 points

For our recommended stocks, earnings season started this week with reports from Walgreens Boots Alliance (WBA) and Wells Fargo (WFC). Next week, Nokia (NOK) reports, and the deluge for our companies starts the following week on October 24 with fourteen companies reporting.

This week, Dow (DOW) and Nokia (NOK) reported earnings. The deluge for our companies starts next week with twelve companies reporting.

Next week, we will publish the November edition of the Cabot Turnaround Letter on Wednesday and our proprietary Catalyst Report on Friday.

WHAT TO DO NOW: Remain cautious but stay tuned. The market remains very narrow, with a few powerful stocks but the vast, vast majority of names either in no man’s land or acting poorly. For potential leaders, we see many that had been perking up before running into a wall this week—but not (yet) selling off abnormally. If these names can hold soon and resume their upmoves, we’ll like to add at least a couple (maybe more) to the Model Portfolio. Tonight, though, given the extreme narrowness of the advance, we’ll grit our teeth and sit tight, holding about three-quarters in cash and see if these potential leaders can get moving.

It’s said that the market climbs a wall of worry. It’s been a slippery wall lately, and this was the week when the bear case for the stock market really seemed to gather momentum.

The short list of bear case arguments includes the following:

The war between Israel and Hamas could easily expand into a broader conflict and draw the U.S. (and Iran, among others) deeper into a situation with no clear exit ...

There have been a lot of interesting developments in the market over the past week, with the lower-than-expected inflation reading and resulting speculation over the Fed’s next move right near the top of the list.

As it stands now, the market is saying no more Fed rate hikes, and even that we’ll see two cuts by next July.

Frankly, that seems a bit aggressive.

Things were looking up until we received this week’s inflation report courtesy of the June CPI data.

The inflation outlook has certainly moved toward the “less bad” end of the spectrum over the last week. That’s the big-picture reason stocks have been doing well since last Friday. On Tuesday the NFIB Small Business Survey (December data) showed that the percentage of small businesses with job openings is falling, as are the percentage of businesses expecting to increase hiring over the next three months and the percentage planning to raise average selling prices.

Aside from AI, a few other big-picture themes came into sharper focus for me this week.

All are positive for small caps.

First, economists and analysts are reducing their recession risk outlooks as the economy continues to hold up reasonably well. That’s good for small caps as they are more economically sensitive than mid and large caps.

WHAT TO DO NOW: Remain bullish, but be prepared for some near-term (and possibly earnings-induced) gyrations. Today’s sharp drop in the Nasdaq and many leaders is a short-term shot across the bow—combined with some other factors, the odds are growing that we may finally see some selling that lasts for more than a couple of days. That said, the overall environment remains bullish, with higher prices likely down the road. All in all, we’re bullish but are taking things on a stock-by-stock basis and expect some further wobbles in the days ahead. Our only change tonight is that we’re placing Celsius (CELH) on Hold. Our cash position remains around 16%.

WHAT TO DO NOW: Remain cautious. Most stocks, sectors and indexes are still stuck in the throes of a corrective phase, though we do like some things like our resilient Aggression Index and (relatedly) some sturdy action among growth stocks. While we could add another small position if the market firms up a bit, we’re comfortable with the stocks we have in the Model Portfolio and our positioning right now. Thus, we’ll stand pat tonight and practice more patience—our cash position is in the low 40% range.

This looks like a classic buy-the-dip scenario. Nothing is for certain, but my best guess is we regain the small-cap 50-day moving average line next week, and after a week or two of choppy action, are trading at another 52-week high.

The S&P 600 Index just made another run but called it quits at 990 and has turned south.

This week marks the beginning of the second-quarter earnings season. I don’t foresee any major changes in the trends in any of our companies, but stock price reactions and trends don’t always line up in the short term.

Even with increased tariff talk and even rockier trading, the markets rebounded strongly Monday. The volatility has increased anxiety, but the consistent bounces are a good sign. In other news, oil prices are bouncing back, interest rates remain subdued, and earnings season begins this week.

We’re switching Target (TGT) and ConEd (ED) from Buy to Hold today. The rest of our ratings remain unchanged.

Most of the stocks in our Cabot Dividend Investor portfolio are behaving quite well; two stocks streaked to new highs in the last few days. I have no changes to the portfolio this week.

More than $15 trillion in assets are linked to the performance of the S&P 500 index in some way, according to S&P Dow Jones.

Apple, at about $2.4 trillion, and Microsoft, at $2.1 trillion, are so large that, taken together, the two companies would be the third-largest sector of the index, behind tech and health care. This share is trending lower as other companies rise.

This week tech stocks looked better while First Republic Bank continues to struggle to gain its footing. It was a relatively quiet week for Explorer stocks as movement up or down was minimal. However, the news on the global electric vehicle (EV) race is coming fast and furious.

One of the minor predictable patterns that the stock market has developed over the years involves the days before and after holidays (like the Fourth of July). Basically, stocks do a little bit better on those days, but the pattern is neither big enough nor dependable enough to make money on. Still it’s worth keeping in mind as you watch the action of stocks this week.