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March 4, 2025

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Many are watching the disaster in growth stocks unfold, including us at EarningsBeats.com, but the reality is that many other areas of the stock market represent a silver lining. When growth stocks sell off, essentially two things can happen. One, the rest of the stock market sells off as well, indicative of pure market distribution. These types of selloffs can lead to large corrections or even bear markets. The second type of growth stock selloff can be much more bullish in nature, as money simply rotates from very overbought growth stocks to much more reasonably-priced value stocks for a brief period of time. The former represents a necessary departure from current bullish trading strategies. The latter represents a need for patience. I want you to look at last week’s performance by sector and decide if the selling was more like across-the-board distribution or simply bullish rotation like we’ve seen many times over the past 12 years of this secular bull market advance:

7 sectors rose last week while only 4 declined. It was absolutely NOT a case where everything was selling off. It may morph into that type of market environment, but that’s not what we saw last week. Remember, the NASDAQ was down more than 5% last week, before Friday’s rally kicked in. That 5% drop was over and above the huge Friday drop just prior to last week. The cumulative drop on the NASDAQ 100 from its all-time high was 8%, not far from correction territory, which is considered a drop of 10% or more, but less than 20%. Options expiration may have triggered the start of this 8% selloff, but it was unlikely the only reason.

A week ago Friday, there was a turning point in the stock market short-term. Money rotated very heavily, on an intraday basis, away from aggressive areas like consumer discretionary (XLY) and into defensive, value-oriented areas like consumer staples (XLP). Part of this shift can be attributed to monthly options expiration in February as there was a TON of net in-the-money call premium on key stocks like NVDA, META, PLTR, etc. Nonetheless, it was the 10th-highest bearish distribution day (between the XLY and XLP) since the financial crisis bottom in 2009. The other 9 all occurred during either cyclical bear markets or during corrections. Will this 10th occurrence be any different than the previous 9? The takeaway here is that those types of massive distribution days are NOT normal and should give us bulls reason to pause. They don’t occur very often, thankfully.

But let’s get back to that sector rotation last week and take a look at financials (XLF), specifically, which gained 2.82% for the week and closed one penny below its all-time closing high of 52.19. The top-performing industry group within financials was full line insurance ($DJUSIF), which broke out of a lengthy period of consolidation, as you can see below:

Bullish momentum is accelerating, as evidenced by the rising daily PPO. Yes, we’re overbought with an RSI at 74, but overbought can remain overbought for a period of time. This is a bullish continuation pattern (uptrend followed by sideways, or rectangular, consolidation) breakout and, outside of a possible brief pullback, I’d look for higher prices down the road, ultimately reaching a measurement target of 88-89. I’ll be featuring a full line insurance stock in our Monday morning EBD that is in position to benefit from this industry group breakout. If you’re not already a subscriber to our FREE EB Digest newsletter, you can CLICK HERE to subscribe.

Happy trading!

Tom

As President Donald Trump unleashes sweeping changes across the US government and overturns decades of American foreign policy, Chinese leader Xi Jinping is preparing to hold a major political gathering designed to project something else: tightly-controlled stability.

Thousands of delegates are arriving in the Chinese capital this week for the country’s “two sessions” annual meeting, a highly choreographed spectacle where Xi and his officials will broadcast China as a major power that’s confident in its direction and steadily advancing its tech prowess and global rise.

That metaphoric split screen between the two powers will be in the spotlight on Wednesday morning in Beijing, when Trump’s first address to Congress will roughly coincide with a state-of-the-union-like speech delivered by China’s No. 2 official Li Qiang at the opening meeting of the National’s People Congress (NPC), which rubber-stamps decisions already made behind closed doors.

There, Li is expected to announce China’s yearly targets for economic growth and military spending — and lay out how Beijing plans to continue its economic growth and transformation into a technological powerhouse in the face of mounting pressure from the United States.

This year’s two sessions, which includes roughly weeklong meetings of both the NPC and the country’s top advisory body, gets underway as the White House is due to double the additional tariff on all Chinese imports to the US to 20% from 10%. Those duties sit atop existing tariffs on hundreds of billions in Chinese goods.

It’s unclear how Beijing will respond to the latest move. Last month, it took what were seen as modest retaliatory steps against 10% duties by slapping 15% tax on certain types of American coal and liquefied natural gas and a 10% tariff on crude oil, agricultural machinery, large-displacement cars and pickup trucks, while restricting exports of certain raw materials.

Despite the challenges, analysts aren’t bracing for any major policy surprises or U-turns. True decision-making power lies with the Chinese Communist Party, whose authority cannot be challenged in the country – and Xi, the party’s most powerful leader in decades.

The increased tariffs — and the threat of more economic and tech controls to come — are casting a long shadow over China’s two sessions, which observers will also be watching for signs on how Beijing will continue to address its rumbling economic difficulties at home.

And signs point to Beijing staying the course on its leader’s strategies to bolster innovation, industry and self-sufficiency to steel itself against frictions ahead: all while projecting that, in China, it’s business as usual.

We must “face difficulties head-on and strengthen confidence” amid growing external challenges, the Communist Party journal Qiushi quoted Xi as saying in an article released Friday that’s meant to set the tone for the gathering.

High-tech prowess

China is entering this year’s two sessions buoyed by a surge of confidence and national pride in its tech sector.

Earlier this year, privately owned Chinese AI firm DeepSeek stunned Silicon Valley with the breakout success of its latest open-source large language model. Adding to that milestone: Beijing’s long-term plans for achieving global dominance in green technologies have borne fruit, with its top electric vehicle maker rivaling Elon Musk’s Tesla.

China’s leaders are expected to continue to prioritize investment in innovation and making the world’s second-largest economy self-sufficient in high tech. Xi and his cadres see high-end chips, quantum computing, robotics and AI as critical to powering economic growth and upgrading Chinese manufacturing.

“China needs to find a new engine for its economic development. The old model, the big infrastructure, construction–driven (one), is probably not going to work … and (the high tech sector) is the most feasible path China has,” said political scholar Liu Dongshu of the City University of Hong Kong. “China will prioritize this – and US pressure makes this more urgent.”

Last month, Washington said it was considering expanding restrictions on US investment in sensitive technologies in China and would continue to restrict Chinese investment in strategic American sectors.

But it’s not all negative pressure, Liu added, as China “sees an opportunity to replace the United States in some parts of the world order.”

“China may think that since (DeepSeek’s success) it can be the leader in global AI over the US, or similarly in areas like climate change, where electric vehicles might be China’s signature policy to solve the climate change problem,” he said.

Observers will also be watching closely what steps Beijing may take to unleash private industry to advance innovation as it gears up for the potential of more restrictions from the US.

Xi sent a strong signal that China needed its entrepreneurs to step up in this fight last month, hosting the country’s top tech executives in Beijing, where he proclaimed it was “prime time” for private enterprises “to give full play to their capabilities.”

Beijing followed the meeting with steps to improve market access for private firms and discussion of a Private Economy Promotion Law, which could be passed in the months, if not the days, ahead – seen as a significant course correction following a years-long, sweeping regulatory crackdown on private industry.

‘Doubling down’

The two sessions gathering is also set, as in past years, to reflect Xi’s increasingly tight grip over China’s political system. The leader used the 2018 NPC meeting to pave the way for him to stay in power indefinitely, with the removal of the presidential two-term limit in the Chinese constitution.

Last year, the scrapping of a longstanding annual press conference led by the country’s second highest-ranking official was widely seen as another sign of Xi’s control over the official narrative – and eliminated a rare chance for journalists to interact with a top Chinese official. The event is not expected to resume this year.

This year, the gathering is expected to again highlight how united the political apparatus is around his vision for the future, despite the country’s economic hurdles.

“The NPC this year will really be in the context of continuing to derisk China’s rise and really hardening its posture against global uncertainties,” including in Beijing’s relationship with the US and Europe, said Nis Grünberg, a lead analyst at MERICS think tank in Germany.

As China “doubles down” on this approach, deepening “the role of the party and the core of the party – Xi Jinping – to steer this whole process is more important than ever to the leadership,” he said.

China’s slowing economy has been roiled by a property sector crisis and high local government debt, while foreign investment has cratered, consumption has flagged and young people struggle to find jobs.

China earlier this year reported 5% economic growth in 2024, a figure viewed with heavy skepticism by many external observers, and analysts say it’s likely to float a similar number for its GDP target this year. Signs for how Beijing plans to address these challenges will also be closely watched, after a raft of policy adjustments since last summer were seen as falling short.

In the days ahead, Beijing may unveil new efforts to boost consumer spending through stimulus or social welfare benefits. US tariffs make this even more urgent, observers say, as China’s manufacturers may need to rely more on the domestic market.

Xi linked weak demand to China’s “economic security” during a key Communist Party economic meeting late last year, according to his speech published Friday in Qiushi — in a signal of the increasing importance of addressing the issue.

But even still, analysts see little sign of a departure from Xi’s primary focus on bolstering support for industry.

Beijing is likely to release policies to “make sure that at least the big and some of the medium-sized industrial producers can survive additional (US) tariffs,” according to Victor Shih, director of the University of California San Diego’s 21st Century China Center.

Beijing is counting on its subsidized companies being able to weather those tariffs, given the dependency of US industries on Chinese goods – and to have its own firms ultimately come out dominant.

“So in a sense they’re not afraid of (them),” he added, of US tariffs.

In the short term, such industrial support could create more friction with the US and China’s other trade partners. The country’s reliance on exports as an agent of growth propelled it to a nearly $1 trillion trade surplus with the rest of the world last year – a driving factor for Trump’s tariff push.

For China, that fits in with the wider message it’s expected to send in the coming days: even as headwinds mount, it’s confidently staying its course – and ready to be seen as a champion of global trade and order.

This post appeared first on cnn.com

The U.S. Treasury Department announced it will not enforce a Biden-era small business rule intended to curb money laundering and shell company formation.

In a Sunday evening announcement, Treasury said in a news release that it will not impose penalties now or in the future if companies fail to register for the agency’s beneficial ownership information database that was created during the Biden administration.

Despite efforts by small businesses to undo the rule in the courts, it remains in effect.

On Sunday, President Donald Trump on his Truth Social media site praised the suspension of enforcement of the rule and said the database is “outrageous and invasive.”

“This Biden rule has been an absolute disaster for Small Businesses Nationwide,” he said. “The economic menace of BOI reporting will soon be no more.”

In September 2022, the Treasury Department started rulemaking to create a database that would contain personal information on the owners of at least 32 million U.S. businesses as part of an effort to combat shell company formations and illicit finance.

The rule required most American businesses with fewer than 20 employees to register their business owners with the government as of Jan. 1, 2024. Small businesses are targeted because shell companies, often used to hide illegally obtained assets, tend to have few employees.

Treasury officials, including former Treasury Secretary Janet Yellen, said the regulatory burden would be small, costing about $85 per business, but would offer benefits to law enforcement officials seeking to track down money launderers and other criminals. She said in January 2024 that more than 100,000 businesses had filed beneficial ownership information with Treasury.

The rule and its legislative authority — the Corporate Transparency Act, an anti-money laundering statue passed in 2021 — have been mired in litigation. In 2022, a small business lobbying group sued to block the Treasury Department’s requirement that tens of millions of small businesses register with the government. On Feb. 27, Treasury’s Financial Crimes and Enforcement Network said it would not take enforcement actions against companies that do not file beneficial ownership data with the agency.

Business leaders cite privacy and security concerns about the database and say it is duplicitous to other government agencies that maintain corporate databases.

“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent on Sunday. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”

This post appeared first on NBC NEWS