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Market Moves Yesterday
S&P 500 @ 6,051.09 ( ⬇️ 0.0026%)
Nasdaq Composite @ 19,926.72 ( ⬆️ 0.12%)
Bitcoin @ $104,692.20 ( ⬆️ 3.16%)
Hey Scoopers,
Happy Monday! Here’s what we’re covering today 👇
👉 Costco’s earnings beat
👉 Big Tech key to earnings growth
👉 Will the S&P 500 gain in 2025?
So, let’s go 🚀
Market Wrap
The Dow Jones Industrial Average continued its downward trajectory on Friday, marking its seventh consecutive day of losses - the longest losing streak since 2020.
The week ended with mixed results across major indices:
The Dow declined 1.8% for the week
The S&P 500 dropped 0.6%, ending its three-week winning streak
The Nasdaq Composite managed a modest gain of 0.3% for the week, though it dipped below the significant 20,000 level
Tech Sector Performance
On Friday, major technology stocks showed weakness, with:
Nvidia declining over 2%
Meta Platforms dropping more than 1%
Amazon trading in the red
However, Broadcom emerged as a notable outperformer, achieving a significant milestone by reaching a $1 trillion market capitalization. The company's shares surged more than 24% following impressive fiscal fourth-quarter results, highlighted by:
Adjusted earnings exceeding analyst estimates
A remarkable 220% increase in artificial intelligence revenue for the year
Market Outlook
Katie Stockton, technical strategist and founder of Fairlead Strategies, shared her market perspective on CNBC's "Money Movers," noting:
"Intermediate term momentum is still very strongly positive and we're seeing fresh breakouts from some large-cap names," she observed.
Stockton anticipates a strong market finish to the year, though she warns of a potential correction in the first quarter of 2025.
Trending Stocks 🔥
Tesla - Shares of the EV maker gained over 2% after reports suggested Donald Trump’s team recommended ending a car-crash reporting requirement. Tesla has reported the most crashes under the program.
Upstart Holdings - The lending platform rallied over 10% after Needham upgraded the stock to “Buy” from “Hold”. The investment firm explained that Upstart now has a “proper balance in funding” and that its balance sheet has strengthened after refinancing some debt.
Penn Entertainment - The online sports betting stock gained almost 4% after JP Morgan upgraded it to “Overweight” from “Neutral”.
E-Commerce Drives Costco’s Sales
Costco just dropped its quarterly earnings as the warehouse giant beat Wall Street's expectations with earnings of $4.04 per share versus the expected $3.79, while revenue hit $62.15 billion. But the real story lies in the details.
Key Insights:
E-commerce sales surged 13% year-over-year
Global traffic increased 5.1%
Membership revenue jumped 8% (excluding forex impact)
Record-breaking 4.2 million pies sold pre-Thanksgiving
What's particularly telling is the "bifurcation" in consumer behavior that CFO Gary Millerchip highlighted.
Some members continue splurging on premium meat cuts, while others gravitate toward lower-priced options. This split perfectly illustrates the current state of the American consumer - resilient but selective.
Investment Implications:
Consumer Adaptation: The surge in meat and produce sales suggests a shift toward home cooking, likely due to persistent restaurant inflation.
Digital Transformation: Costco's success in e-commerce, particularly in bulky items, shows that traditional retailers can successfully compete in the digital space.
Value Proposition: The company's ability to maintain high renewal rates (90.4%) while hiking membership fees demonstrates the strength of its value proposition.
Market Performance:
Costco shares have soared nearly 50% this year, significantly outpacing the S&P 500's 27% gain.
Analysts Bet on Big Tech
The market is painting an intriguing picture for 2024. Earnings growth for the S&P 500 index is forecast at 9.5%, notably above the 10-year average of 8%.
But here's where it gets fascinating: The "Magnificent 7" are doing the heavy lifting, projected to deliver a stunning 33% earnings growth, while the other 493 companies are expected to grow at a modest 4%.
Think about that contrast for a moment. It perfectly illustrates why our 80/20 investment approach makes sense - capturing broad market growth while strategically positioning in quality stocks.
Breaking Down the Numbers:
8 out of 11 sectors show a positive earnings outlook
Five sectors projecting double-digit growth
Overall market profit margins at 12% (beating the 10-year average)
Revenue growth holding steady at 5.1%
The Crystal Ball for 2025
Wall Street analysts predict the S&P 500 will hit 6,678 by the end of 2025 - about 10% above current levels.
But here's the kicker: these same analysts have historically overestimated index performance by 6.9% over the past 20 years. Adjusting for this bias suggests a more modest target of 6,216.
Smart Money Moves:
Health Care, Materials, and Energy sectors show the highest potential upside
Consumer Discretionary might face headwinds
The tech-heavy market concentration continues, highlighting the importance of diversification
What This Means For You
Remember our core strategy: investing 80% in low-cost index funds provides broad market exposure while investing 20% in quality stocks allows you to participate in specific growth stories.
The projected numbers support this balanced approach: You capture the overall market growth while maintaining the flexibility to adjust to sector opportunities.
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DISCLAIMER: None of this is financial advice. The newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.