by Jason Bodner
February 25, 2025
Most of the country is currently in a deep freeze – except south Florida, where I live. Sorry about that!
But February in the southern-hemisphere is in the last month of their summer, so it is warm down there.
The calendar says we are more than halfway through the first quarter, so this is a good time to do a market check-up. First, let’s check on earnings for the S&P 503. No, that’s not a typo: The S&P 500 has over 500 stocks in it. According to FactSet and several other data providers I use, the S&P index contains as many as 503 stocks. Mainly, this is because some companies have duplicates. For instance, Google has two classes with different tickers: GOOG and GOOGL – the same company but two with stocks in the index.
According to FactSet, as of this writing, 86% of the S&P 500 had reported earnings. Approximately 76% of companies have beaten earnings while 62% have beaten sales – right in line with the 10-year average:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Earnings growth is beating predictions in 7 of the 11 S&P sectors thus far. Financials companies are seeing the most growth, followed by discretionary companies. Interestingly, technology stocks thus far have seen earnings growth under predictions. That can change once NVDA (I own shares) reports tomorrow. Energy is the lone earnings contracting sector, but it deals with seasonality and volatile oil prices:
FactSet
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Interestingly, earnings growth doesn’t always drive share prices – immediately, anyway.
Next, we check in on all sorts of index performance since the start of the year. Some things stand out.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Here are some highlights:
- Energy; despite experiencing earnings contraction, is up 6.66%.
- Health Care; one of the weakest recent sectors, is up 6.05%.
- Discretionary stocks; posting what looks to be the biggest beat of earnings growth predictions, is down 1.15% since January 1st.
- Technology; the engine of growth I like to see power bull markets, is only up modestly, +1.9%.
- Most Growth indexes are up nicely.
- The small cap heavy Russell 2000 is the lagging index – while still being up 1.58%.
- Semi-conductors are performing nicely: +6.57%.
That said, if we look from the beginning of February, we only see mediocre index performance:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This push-pull of sector performance impacts MAPsignals’ sector strength and weakness, but remember, strength and weakness are also a factor in fundamentals, like sales and earnings growth, and profitability:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
When we look at inflows and outflows, we see steady, but not heavy, inflows into financials stocks, a sector that is clearly rising in price, but the bulky big inflows took place months ago. Utilities stocks are seeing rising-inflows and dwindling-outflows, pushing the sector higher.
Technology is interesting in that it is seeing both increasing inflows and outflows. That indicates a tug of war within the sector, and, as we see below, this results in sideways sector price action:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Financials, Technology, Communications, and Discretionary are sectors trading at or near recent highs. Those are positive engines of sustained bull markets. The other sectors are less strong but still showing positive action. Energy, Materials, Industrials, Staples, Health Care, and even Real Estate are rallying from lows.
We have been seeing balanced inflows and outflows since January 1st. That indicates a rotation and tug of war below the surface of the market. We also see sustained buying in mid-cap companies ($5-50 billion):
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The tug of war can be seen in inflows and outflows at the industry and sub-industry level.
Here’s a look at those industrial inflows and outflows by industry within key sectors:
Discretionary:
- Inflows: Hospitality Services (entertainment, hotels, restaurants and bars)
- Outflows: Hospitality Services (restaurants and bars, footwear producers)
Financials:
- Inflows: Investment Services (consumer finance, securities sales and trading, financial software)
- Outflows: Insurance (property and casualty)
Health Care:
- Outflows: System Specific Bio-pharmaceuticals
Staples:
- Outflows: Food and Beverage Production
Technology:
- Inflows: Software, Internet and Data Services
- Outflows: Software, Semi-conductor Manufacturing (enterprise management software)
Real Estate:
- Outflows: Equity REITs
The news tells us that investors are souring on the economy and it’s time for risk-off. That’s all possible, but the S&P 500 is only 2% down from all-time highs made just two days ago, and it’s only down 0.45% for the month, so let’s take “souring” with a grain of salt. Fears are surfacing that Trump’s aggressive action and sweeping change in federal employment will push us into recession. Perhaps, but perhaps not.
For now, stocks have sold-off slightly from all-time highs. That, in my opinion, is to be expected. As we cap off earnings season, the market is tired and needs a little rest. It’s only natural to see a little give-back.
Stocks have seen more inflows than outflows. Lately, outflows are picking up ever so slightly and we are heading into a period between earnings seasons. Historically, that’s when volatility can strike from nowhere, as there are fewer company-related headlines to take up the market oxygen.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
It is also positive that volumes have been healthy as the market goes higher. This indicates that real inflows are pushing values higher, as opposed to drifting higher on thin volumes:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
All of this has had a positive effect on the Big Money Index:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This all seems promising until we review one glaring statistic: as of the Friday February 21st close, 48.5% of the S&P 500 stocks closed below their 50-day moving average. This is a sign of a weakening market. We will have to keep an eye on this, as this could be a sign of a reversal. For now, the silver lining is that only 41% of the S&P 500 is trading below their 200-day moving average.
Friday February 21st saw a sloppy trading session where indexes sank:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The market is still near all-time highs. Signs of potential weakness are to be expected. Nothing goes straight up forever. But in looking over 100-years, stocks usually rise – plain and simple.
Keep vigilant; the tides haven’t turned quite yet.
“If a man knows not to which port he sails, no wind is favorable.” – Seneca
Navellier & Associates own; Alphabet Inc. Class A & C (GOOG,GOOGL), and Nvidia Corp (NVDA), in managed accounts. Jason Bodner owns; Nvidia Corp (NVDA), in a personal account. He does not personally own Alphabet Inc. Class A & C (GOOG,GOOGL).
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
As U.S. Relations Thaw with Putin, a Chill Falls Over Europe
Income Mail by Bryan Perry
Taking Stock of Trump’s Tough Tariff Talk
Growth Mail by Gary Alexander
All Hail February 25th – a Red-Letter Day in U.S. Financial History
Global Mail by Ivan Martchev
The Friday Curse of the S&P 500
Sector Spotlight by Jason Bodner
A Mid-Quarter S&P Sector Review
View Full Archive
Read Past Issues Here
Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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