This time of year usually means bears are settling in for hibernation.
But it seems someone didn’t inform the bears.
So far this month, major stock indexes have been trending downward, which is a bit surprising given that November is historically one of the stronger months. Over the last two decades, the S&P 500 has typically posted an average return of 2.2% and has been profitable about 74% of the time.
However, the last week has been particularly challenging for several stocks in the AI and data center sectors.
For instance, shares of Palantir Technologies, NVIDIA, and Super Micro Computer have all taken a hit recently.
We talked before about worries surrounding an “AI bubble” that seem to be dragging these stocks down, in a previous piece in Market 360, and how the dynamics of mean reversion have played a role.
On a slightly brighter note, this week, the market has displayed a surprising resilience.
In fact, it seems the narrative spun by cautious Wall Street analysts is starting to unravel.
For example, stocks rallied yesterday, particularly with news from Washington about lawmakers moving closer to an agreement to end a 40-day shutdown. At the same time, tech companies under pressure are starting to regain some ground. This wasn’t just a typical bounce-back; there was genuine strength beneath it.
Now here’s something to consider… When a “shock” event happens, like last week, especially in a sector that saw significant volatility among AI and data center companies, it’s crucial to be aware of the potential aftershocks. Generally, you’d expect the intensity to taper off as the selling pressure eases, which is pretty much what’s unfolding now.
I’ve observed patterns like this before. Just a few weeks back, the gold market experienced its largest one-day fall in over a decade but bounced back just as quickly. That serves as a reminder that strong sectors often rebound rapidly once the selling subsides.
The strength of gold illustrates what I anticipate for today’s AI and data center leaders. I expect to see a brief period of disruption followed by renewed vigor once things settle down.
In the meantime, let’s not forget that revenue is still holding strong. According to FactSet, 91% of S&P 500 companies have reported their quarterly earnings, with 82% surpassing analysts’ expectations. Overall, the S&P 500 Index has shown an average surprise gain of 7%, leading to earnings growth of 13.1%.
Recent Rating Changes
To sum it up, the fundamentals supporting price gains remain solid, backed by robust earnings growth, reduced uncertainty, and favorable seasonal trends as we enter the holiday season.
This is why I see this current volatility more as a rotation in the market than a setback.
To identify where leadership is shifting, I’ve gone back and examined the latest trends in institutional buying and each company’s financial standing. I updated Stock Grader’s (subscription required) recommendations for 165 large-cap blue-chip stocks. Among these companies…
- 23 stocks received upgrades from “strong (B rating)” to “very strong (A rating).”
- 41 stocks moved from neutral (C rating) to bullish (B rating).
- 32 stocks improved from bearish (D rating) to neutral.
- 11 stocks were elevated from very weak (F rating) to weak.
- Thirteen stocks were downgraded from “very strong” to “strong.”
- 20 stocks moved from “strong” to “neutral.”
- Sixteen stocks slipped from “neutral” to “weak.”
- Nine stocks were reduced from “weak” to “very weak.”
We’ve highlighted the top 10 stocks rated “Very Strong” below. A more detailed list, including fundamental and quantitative grades for all 165 stocks, can be found elsewhere. It might be worth checking out, especially since you likely hold at least one of these in your portfolio.
Strategies for Enhancing Success
My stock grader is identifying inherently stronger stocks that financial institutions are quietly accumulating—stocks that could outperform in the long haul.
If you’re looking to tap into these emerging trends, my colleague Jonathan Rose adopts a more tactical strategy.
He keeps an eye on where Wall Street’s key funds are early on and often identifies the same leading stocks that my stock graders spotlight weeks in advance. During yesterday’s Profit Surge Event, we discussed how monitoring real-time buying pressure can align your moves with the actual market leaders.
But there’s more. Jonathan also detailed how minor adjustments can significantly enhance your effectiveness. Think 500% or even more.
If you missed it, don’t worry—there’s still a chance to catch up. You can find the replay to see how Jonathan and I interpret the current market dynamics and how you can stay ahead as new leaders come into view.
With Fed policy remaining accommodating, corporate profits on the rise, and investor confidence solidifying, it’s an opportune moment to refine your strategy for the remainder of 2025.
Watch the replay to catch up on what you may have missed.
Sincerely,
Louis Navellier
editor, Market 360
The Editor discloses that he owns, directly or indirectly, the following securities mentioned in this analysis: NVIDIA Corporation (NVDA), Palantir Technologies, Inc. (PLTR), and Super Micro Computer Corporation (SMCI).
