The S&P 500 (SPX) and S&P 100 (OEX) closed at minor all-time highs (ATHs) on Tuesday, while the rest of the major indices were near that mark as the relentless push higher continues. The leadership over the past month has shifted from AI and Technology to cyclical sectors -- which is what happens in a strong bull market. Rotation is really starting to gain some footing in 2024 and is critical to a long and enduring uptrend. We have seen addditional cyclical sectors join the party over the past month, as Energy (XLE +8.6%), Materials (XLB +6.8%), and Industrials (XLI +4.5%) have taken some of the load off the Technology gains.

After the heavy-volume, bearish reversal on March 8 for the Nasdaq, Nasdasq 100 (QQQ), semiconductors, and most of the Technology sector, we had some downside follow-through for the first time since this monster rally started in October 2023. The QQQs and the iShares Semiconductor ETF (SOXX) have lost their 21-day exponential moving averages (EMAs) by a minor amount. Still, for more than four months, the 21-day EMA has been quickly recaptured whenever this happened.

Determining a realistic estimate for the size of the Artificial Intelligence industry is a challenge, as there is simply no measurable unit of AI output comparable to barrels of oil or tons of steel. As well, much of the AI development occurs within laboratories and at universities - and results are measured in tangible progress against AI objectives, not dollars or units of output. In the corporate world, nearly all pure-play AI companies service micro-niches, have little measurable revenue, and are deeply unprofitable. Argus believes that much of the revenue and most of the profitability from the AI industry is attributable to several giant U.S. and a few international companies. These primarily operate in growth sectors such as Technology, Communication Services, and Consumer Discretionary. Key companies include Amazon, Microsoft, Apple, Meta Platforms, IBM, Alphabet, Salesforce, Nvidia, and Qualcomm in the U.S. China has Baidu, Tencent, and Alibaba all developing AI solutions. There is also significant activity among companies pursuing advances in IoT, vehicle electrification, autonomous driving, automation, and connectivity for manufacturing, warehousing, construction, and other areas. Argus has derived a model of the size and scope of the global AI industry, based on our coverage of major publicly traded players and most of the mid-tier players, along with our industry knowledge of private players. We estimate the global industry annual revenue amounted to $90-$100 billion in 2021, and expect that to grow at a 40% CAGR through 2030, when it is expected to reach $1.8 trillion. Annual growth is expected to decelerate from the low- to mid-40% range in the immediate years, to the mid-30% range for years toward the end of the survey period.

We are raising our long-term technical outlook to Bullish and most likely will raise the intermediate-term outlook to bullish if we ever get a pullback. With the benefit of hindsight, both timeframes should have been changed to bullish either in the middle of 2023 or late 2023. Yet for the most part, the daily commentary in parts of 2023 and 2024 conveyed bull-market action in market breadth, as well as breadth and price thrusts typically seen in early bull markets. Things got tricky in October 2023, when the S&P 500 broke many key averages as well as its bull-market trendline off the October 2022 lows. In addition, market breadth fell back to bear-market territory. At the same time, the entire yield curve was in a strong uptrend, hitting and exceeding 5%.

We are one session away from making it 17 out of 19 weeks in which stocks have moved to the upside. We've been throwing grenades at this move for a while, based on overbought and divergent momentum readings and excessive sentiment readings -- and it just does not matter. Yes, price is the final arbiter!

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

Make it 16 out of 18 weeks to the upside, as the S&P 500 (SPX), Nasdaq, and Nasdaq 100 (QQQ) continued to witness relentless buying in the week ended March 1. Stocks were flat until the final two days of that week, when inflation worries were squashed by the January PCE report. It wasn't just stocks that reacted, as metals, oil, and bonds all popped on March 1. Bitcoin surged 21%.

On Friday, the Bureau of Labor Statistics (BLS) likely will provide further evidence that the U.S. job market is healthy. The bigger question is whether the Employment Situation is strong enough to match the 333,000 nonfarm jobs created in December and the 353,000 in January. We believe the job market is strong, but not that strong. In a speech at Princeton University last month, Fed Governor Lisa Cook said that "a range of indicators suggest continued strength in the labor market but also areas worth monitoring for softening demand." The layoffs that make occasional headlines really aren't showing up in the numbers. The four-week average of initial jobless claims is running at 212,500, below the 300,000 that might signal a critical weakening in the job market. The Layoffs and Discharges series in the BLS Job Openings and Labor Turnover Survey (JOLTS) was 1.6 million for December, below the average of 1.925 million since late 2000. "Layoffs and claims for unemployment insurance remain low, implying that all the slowing in labor demand thus far has been along the hiring margin," Dr. Cook said. Job openings and hires, in the JOLTS report, and average weekly hours, in the employment situation report, have declined. Dr. Cook also noted there were signs of "gradual cooling" in the employment cost index for the private sector, which rose 4.1% on a 12-month basis in December, down from 5.1% over the previous 12 months. The January ADP National Employment Report, which tracks private sector hiring, also noted that pressure on wages continues to ease. We expect the employment report on Friday will show that February payroll growth moderated to 185,000, while the unemployment rate remained at 3.7%. We expect growth in average hourly earnings fell by one-tenth to 4.4%, and average hours rose to 34.3 from 34.1, which may have been depressed by January weather.

Depending on today's close, the three major indices might achieve 16 positive weeks out of 18 on their northern glide path. So far, this surely is a "leap" year. The Nasdaq finally made an all-time high (ATH), jumping above the last ATH from November 19, 2021. Yes, that took a long time (about 27.5 months). But after the 2000 high, it took the index more than 15 years to recover -- so just a couple years isn't so bad. Is this a significant breakout? As we have said, great breakouts to ATHs occur after multi-year bases, not after vicious rallies.

Tuesday was a solid day for biotechnology stocks -- and not the large-cap names that dominate some ETFs, but rather smaller issues, some of which are unknown to many. First off, we have talked about how important ETF selection is -- as even names in the same industry can be vastly different. The two main biotech ETFs, the iShares Biotech (IBB) and the SPDR S&P Biotech (XBI), are about the same size, with over $7 billion in net assets. But that is where the similarities end.

Monday Tee Up: Back to Inflation

In this edition, we explore the state of US auto market; margin of safety erased in US equity market rally; growing pains and growth in US equity market; and EOG Resources, Alnylam, and Pembina.

Bumps in the Soft Landing

Stock indices dipped in October 2023, with the S&P 500 falling a sharp 10% off summer highs. Looking at 13F filings of big institutional portfolios, we see that the big guns were busy last quarter taking advantage of that dip. Citadel Advisors went on a buying spree, adding to its $100 billion portfolio across a range of sectors. As did D.E. Shaw, adding to its $67 billion portfolio. Vickers Stock Research, a subsidiary of Argus Research Group, analyzes insider trading and institutional stock ownership. Form 13-Fs, which institutions must file to report their holdings, are due 45 days after the end of calendar quarters and have come in for 4Q24. We review 13Fs of major activists to determine core holdings and new purchases. Activist investing is now less about generating a short-term return and more about achieving long-term returns through an active management/investor partnership. Based on data from Vickers, here are some recent new purchases and key holdings of activist investors, as well as other high-profile money managers.

While everyone in the investment world will be waiting (nervously or confidently) for Nvidia's quarterly numbers after the close on Wednesday, there certainly are other important Q4 EPS reports this week -- like those from WMT, HD, PANW, ADI, SNPS, VRSK, INTU, BKNG, MELI, EOG, BRK.B, among others. In addition to NVDA, stocks that are quite extended after large-to-massive moves since late October (about four months ago) include PANW, INTU, BKNG, MELI, and BRK.B. Betting on more near-term upside from these stocks, no matter what they report, is a tough technical game as they all have extreme 14-day and 14-week Relative Strength Index (RSI) readings in the high 70s to mid-80s. Needless to say, this should be another interesting week.

What goes up in a straight line sometimes comes down in a straight line. Tuesday was a nasty day for stocks, but it could have been much worse if not for a late-day rip higher. The S&P 500 (SPX) was down 102 points or 2% at 3:20 pm, but rallied over 30 points to finish down 1.4%. The Nasdaq fell 1.8%, the Nasdaq 100 dropped 1.6%, the S&P MidCap 400 gave back 2.4%, and the Russell 2000 collapsed 4%.

In this edition, we say viva Veeva; the China housing market is building up to something positive; computer software has a great future; and Sensata, Sunny Optical, and Onsemi.

Stocks were mixed on Friday morning following the Labor Department's revision to the inflation data. After seasonal revisions to CPI, December's reading was revised down to 0.2% from the prior 0.3% increase. November's CPI was revised up from a 0.1% increase to 0.2% after the adjustment. The seasonal adjustments are made annually, coinciding with January's CPI release, to account for price movements in the previous year. The S&P 500 gained 0.2% and in intraday trading the index was above 5,000. The Dow is down $0.3% and the Nasdaq is up 0.9%. Crude oil is trading above $76 per barrel, while gold lost $10 to trade near $2038.

U.S. equities inched higher on Thursday despite regional bank woes and ahead of the CPI revisions that will be released this morning. After hitting 5000 for the first time ever, the S&P 500 closed just below 5000. The Dow also closed at an all-time high. Big stock gainers include Arm Holdings PLC (ARM), up 48% and Ralph Lauren Corp. (RL), up 25%. The S&P 500 closed up less than 0.1%, the Dow was up 0.1% and the Nasdaq gained 0.2%. Crude oil rose above $76 per barrel and gold was up $1 to $2049 per ounce.