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Market Update: Stocks Show Signs of Recovery
This week’s trading concluded on an optimistic note, as stocks rebounded from previous oversold conditions. The absence of new tariff developments has contributed to this uplifting sentiment, particularly after the S&P 500 slipped into correction territory on Thursday. In typical fashion for an oversold market rally, the stocks that experienced the steepest declines during the recent sell-off are now showing the most significant gains.
Sector Performance
Technology stands out as the top-performing sector within the S&P 500 for the session. Additionally, both financial and consumer discretionary sectors posted considerable gains. In contrast, consumer staples and healthcare sectors saw milder increases, reflecting their more robust performance during the market’s downturn.
Winners and Losers in the Portfolio
Nvidia emerged as the largest gainer in the week’s trading, fueled by a recovery from oversold levels rather than a complete avoidance of concerns regarding artificial intelligence spending. Investors are also eagerly anticipating developments from next week’s GTC conference.
Another notable performer, Coterra Energy, benefited from a notable increase of over 3% on Friday, contributing to the energy sector’s overall positive performance this week. Other stocks that showed remarkable upward movement include CrowdStrike, which we decided to buy more of following a significant pullback on Monday, and Eaton, which we enhanced our holdings in on Thursday. CrowdStrike, in particular, has seen a resurgence, rising over 12% since the start of the week.
Eaton’s recent investor day, where ambitious targets for 2030 were presented, resulted in an upgrade from KeyBanc the following day, further boosting investor confidence.
On the flip side, Apple faced challenges, continuing to grapple with tariff-related concerns and limited advancements in its AI capabilities. The company recently announced a delay in the release of its AI-enhanced Siri, pushing the timeline to 2026. Overall, consumer-related stocks have had a tough week, with heightened worries about the economy and spending, underscored by a disappointing first-quarter report from Delta Air Lines and lackluster outlooks from several retailers.
Other significant decliners in the portfolio included Starbucks, Home Depot, and Disney. We opted to increase our investment in Home Depot on Thursday and added more shares of Disney on Monday. Abbott Laboratories also took a hit, erasing weeks of previous gains. Our cautious approach towards Abbott’s surging stock price led us to sell shares on three different occasions since February, anticipating potential volatility.
On Friday, Abbott was further impacted by a judge’s decision to grant a retrial in an case involving specialized infant formula in St. Louis, after an initial jury siding with Abbott and Reckitt Benckiser last November. Analysts at TD Cowen expressed optimism, stating, “Based partly on the jury verdict last fall, we believe that ABT is well-positioned to prevail in a second trial should one take place.” While we concur with this assessment, we remain cautious, understanding that market reactions to litigation can be unpredictable, prompting us to hold off on repurchasing shares until more clarity emerges.
Looking Ahead
Next week appears to be relatively quiet in terms of earnings reports from the companies in our portfolio. Notable reports will come from a handful of companies, including Micron, Nike, FedEx, Lennar, General Mills, Ollie’s Bargain Outlet, Five Below, and Jabil. A significant upcoming event is Nvidia’s annual GTC conference. Data releases to monitor include retail sales, housing starts, weekly jobless claims, and existing home sales. The Federal Reserve’s policymaking committee will conclude its two-day meeting on Wednesday, with expectations that interest rates will remain unchanged in the 4.25% to 4.50% range. However, the likelihood of a rate cut in June has surged to approximately 78%, up from 50% just a month ago, as indicated by the CME FedWatch tool.
Source
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