Tech's Triumph Masks a Brewing Storm
The markets are flashing green, but beneath the surface, the data tells a more nuanced story. Dow Jones futures are up, S&P 500 futures are following suit, and the Nasdaq 100 is leading the charge, according to early reports. The previous week saw record highs, and tech stocks are, predictably, driving much of this optimism. But a closer look reveals some discrepancies that warrant attention.
Cracks in the Foundation
While the Nasdaq composite jumped 2.2% last week, the small-cap Russell 2000 declined 1.4%. This divergence suggests that the rally is not broad-based. It's being fueled by a select group of large-cap tech companies, masking potential weakness in the broader market. The Innovator IBD 50 ETF (FFTY) rallied 2.3%, indicating strength in growth stocks, but the iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.4%. This indicates that even within the tech sector, not all segments are participating equally in the gains.
The VanEck Vectors Semiconductor ETF (SMH) popped 3.4% last week, which is definitely a bright spot, but the ARK Innovation ETF (ARKK) fell 0.4%, and the ARK Genomics ETF (ARKG) declined 2.35%. This underperformance of innovation-focused ETFs raises questions about the sustainability of the current market enthusiasm. Are investors becoming more selective, favoring established tech giants over riskier, disruptive plays? The performance of these ETFs could be indicative of a shift in risk appetite (or lack thereof). I've looked at hundreds of these performance reports, and the divergence here is pretty stark. It's worth noting that Palantir, Robinhood stock and AMD are top 10-holdings across ARK Invest's ETFs, so their fate is intrinsically linked.
Commodities are also sending mixed signals. The SPDR S&P Metals & Mining ETF (XME) retreated 3.2% last week, while the Energy Select SPDR ETF (XLE) rose less than 0.1%. This suggests weakness in the industrial sector and a lack of strong demand for raw materials. U.S. crude oil futures fell 0.85% to $60.98 a barrel last week, further supporting this view. The 10-year Treasury yield edged down to 4.08% on Sunday night and jumped 10 basis points to 4.10% the previous week, which is a bit of a head-scratcher. It is a sign of uncertainty about future economic growth (or perhaps just volatility).
Earnings and the Buffett Factor
Key earnings reports are expected from Palantir (PLTR), Robinhood (HOOD), Advanced Micro Devices (AMD), AppLovin (APP) and Astera Labs (ALAB) in the coming week, which will provide further insights into the performance of these companies and the broader market. Futures Rise; 3 Stocks In Buy Areas With Big Earnings Due - Investor's Business Daily MongoDB (MDB) stock jumped 7.9% to 359.78 last week, clearing a 344.85 flat-base buy point, and Eli Lilly (LLY) stock rallied 4.5% to 862.86 last week, indicating strength in specific sectors. But these individual successes don't necessarily translate into overall market health.
Berkshire Hathaway (BRKB) reported Q3 operating earnings rose 34% vs. a year earlier, topping estimates, with a cash hoard of $381 billion. This is the part of the report that I find genuinely puzzling. What is Buffett waiting for? With such a massive cash pile, Berkshire could be making strategic acquisitions or investments that would boost the economy. His announced departure in six months adds another layer of uncertainty. Will his successor maintain the same conservative approach, or will they be more aggressive in deploying that capital? It's a question on everyone's mind, and the answer will have significant implications for the market. The numbers are impressive (a 34% increase), but the context is what matters.
OPEC+ agreed to a small oil production hike in December but plans to pause any further hikes through Q1 2026. The rise was about 0.1%—to be more exact, 0.09%. This cautious approach suggests concerns about future demand and the potential for oversupply. It's a balancing act, and OPEC+ is clearly prioritizing price stability over maximizing production.
A Mirage of Prosperity
The market's current trajectory reminds me of a desert mirage. From a distance, it looks like a refreshing oasis, but as you get closer, the illusion fades, and you realize it's just shimmering heat and sand. The headline numbers paint a rosy picture, but the underlying data reveals cracks in the foundation. The rally is narrow, concentrated in a few sectors, and driven by a handful of large-cap tech companies. The broader market is not participating equally, and there are signs of weakness in key areas such as small caps, commodities, and innovation-focused ETFs. The market is up, but is it sustainable?
