To The Moon

💰 $Direxion Daily S&P 500 Bull 3X(SPXL)$/$ProShares UltraPro QQQ(TQQQ)$: Major stock index futures rise in pre-market trading. Seize the rebound opportunity.

💹 $Domino's Pizza(DPZ)$/$Keurig Dr Pepper Inc(KDP)$/$Philip Morris(PM)$ : Solid consumer stocks demonstrate a balanced approach, with the potential to outperform the broader market.

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| Market recap

On Friday, the United States released disappointing data on consumer confidence, real estate, and the service sector, causing market anxiety over the US economic outlook and persistent inflation. Notably, the S&P 500 index experienced its largest single-day decline of the year, dropping by 1.7%, while the Nasdaq fell sharply by 2.2%.

Major US stock indices declined this week, with $S&P 500(.SPX)$ down 1.66% and $NASDAQ(.IXIC)$ down 2.51% for the week.

Chinese concept stocks generally rose, with $NASDAQ Golden Dragon China Index(HXC)$ up 1.7%, $Pony AI Inc(PONY)$ increasing by over 32%, $DouYu(DOYU)$ up more than 17%, and $Alibaba(BABA)$ rising nearly 6%.

On Monday, after last week's substantial 6% rise, $HSTECH(HSTECH)$ experienced a pullback and fell by 1.2%. Analysis suggests that the inflow into the Hong Kong stock market primarily consists of mainland funds or funds that were already focused on investing in the Chinese market, with broader European and American investors not adding positions, resulting in insufficient incremental funds.

Megacaps

On February 21, $NVIDIA(NVDA)$ faced a wave of selling, and by the market close that day, its stock price had plummeted by over 4%.

Earnings warnings indicate that NVDA’s high growth may not be sustainable. Although the market anticipated this, the critical question is how much volatility can be withstood under heightened neural tension.

On February 26, after-hours trading in the US, NVDA was set to release its Q4 2024 earnings report, with market expectations at $42 billion, anticipating a significant slowdown in the growth rate to 73%.

MAGA alt.

Since the beginning of the year, $SPDR EURO STOXX 50 ETF(FEZ)$ has risen by over 13%, easily outperforming SPY and QQQ. Year-to-date, US stocks have lagged slightly behind the Eurasian markets, with pan-European indices experiencing nine consecutive weeks of gains, marking the longest weekly rally in nearly a year.

Economic outlook

Two days after $Wal-Mart(WMT)$ ’s earnings report, its stock had fallen nearly 9%, with weak guidance unsettling the market and raising concerns about the deterioration of the US economic fundamentals.

Deeper concerns arise from policy issues. Some institutional investors believe that punitive tariffs, immigration enforcement, and federal budget cuts led by the so-called "Department of Government Efficiency (DOGE)" will adversely affect the US economy. Aggressive trade policies may exacerbate inflationary pressures and reduce consumer spending. Additionally, Trump’s tough stance on immigration could lead to a limited labor supply, thereby impacting economic growth.

| The Tables Have Turned

The intensifying pressure of inflation in the United States has finally impacted Americans' breakfast tables: the rising prices of breakfast staples such as eggs, orange juice, and coffee are becoming increasingly hard to ignore.

Surging prices of everyday consumer foods will continue to drive inflation higher and directly affect American consumers. Egg prices in the US have risen by 53% year-to-date, and coffee futures have increased by over 30% so far this year.

Whether the recent January CPI data and the soaring prices of eggs and coffee are attributed to "Biden inflation" or "Trump inflation," inflation will remain a challenge that Trump must face in the coming months.

| Defense Mode On

$Consumer Staples Select Sector SPDR Fund(XLP)$ was the only significantly rising sector ETF last Friday. Consumer stocks, in the current environment, offer both offensive and defensive capabilities. Combined with performance information, they have the potential to outperform the broader market: $Domino's Pizza(DPZ)$ , $Keurig Dr Pepper Inc(KDP)$ , $Philip Morris(PM)$ .

DPZ

"30 Minutes, or It's Free!" $Domino's Pizza(DPZ)$ , an internationally renowned pizza brand established in 1960, has become deeply ingrained in consumers' minds with its promise of “30-minute delivery or free.” With over 20,000 locations worldwide, it is the largest pizza brand in the world.

When a stock guru steps in to increase holdings, it’s akin to pairing fine wine with good food. In Q4 2024, aside from initiating positions in Star Market Brands, Buffett also purchased Domino's Pizza, investing $36 million, increasing his holdings by 86.49% and raising its portfolio weight by 0.17%. Buffett first established a position in Domino's Pizza in Q3, and this additional investment reflects his confidence in the stability of consumer stocks. Pizza, being an affordable consumer good, possesses inflation-resistant qualities and maintains more stable demand during economic downturns.

Domino's Pizza plans to release its Q4 earnings report before the market opens on February 24, with the market expecting modest growth but still optimistic about overall annual profit improvement. Despite overall category weaknesses, Domino's Pizza remains capable of continuing to expand its market share.

KDP

A Household Name. $Keurig Dr Pepper Inc(KDP)$, formed by the merger of Keurig Green Mountain and Dr Pepper Snapple Group, has quickly become a leading company in the North American beverage industry. With a strong brand portfolio, including Keurig coffee machines and Dr Pepper soft drinks, KDP holds a significant market position.

Solid fundamentals with steady stock price gains. In its most recent financial report, KDP demonstrated robust financial performance, with a gross margin of 56% and a net profit margin of 15%. Since hitting bottom on February 10, the company’s stock has rebounded and continued to rise, gaining three consecutive days last week.

KDP is set to release its latest earnings this Tuesday. Although rising coffee bean prices and inflationary pressures in the US may impact KDP's performance, particularly increasing costs for its coffee-related products, the company’s diversified product line and flexible pricing strategies, combined with strong sales from core brands and cost control measures, are expected to mitigate external pressures and demonstrate adaptability and growth potential in a complex market environment.

PM

A Growing Tobacco Leader. $Philip Morris(PM)$ owns well-known brands such as Marlboro and has been continuously innovating, transitioning from a value stock to a growth stock. The company is actively reducing the harms caused by tobacco combustion, promoting IQOS, acquiring ZYN, and focusing on smokeless products and international market expansion.

Last Friday, amidst a broad market decline, PM’s stock soared nearly 2%, leading large-cap stocks higher. This tobacco giant’s stock price has been on the rise, increasing by over 18% in February and more than 29% year-to-date.

A high-dividend value stock with strong expansion capabilities. The company maintains excellent overall financial health, with a gross margin of 65%, reinforcing its position as a key player in the tobacco industry. The company is favored by investors for its 3.5% dividend yield and a 17-year streak of dividend payments.

The integration of AI into the gaming industry presents significant growth opportunities for leading companies like Sony, Take-Two Interactive, and Kingnet. As these companies leverage advanced technologies to enhance game development and player experiences, they are well-positioned to capitalize on the evolving market dynamics and drive sustained growth in the coming years.

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