Stocks closed mostly lower yesterday with the Nasdaq down -1.21% and the S&P 500 down -0.83%. Only the small-cap Russell 2000 and mid-cap S&P 400 managed to finish in the green.

Profit taking and position squaring, especially in tech, has weighed on stocks.

Although, that should not have come as too much of a surprise given the sharp gains we've seen over the last handful of months.

In fact, from the April lows, when all of the major indexes were underwater following the original tariff announcements, to their recent high closes, the Dow has rallied by 31%, the S&P gained 42%, the Nasdaq surged by 62%, and the Russell was up 45%.

YTD, the gains are more modest, but still impressive with the Dow up 8.34%, the S&P up 12.5%, the Nasdaq up 16.2%, and the Russell up 5.32%.

Regardless, we were due for a pullback.

But pullbacks are common. Some say they are the pauses that refresh.

Pullbacks are defined as a decline between -5% and -9.99%, and they happen on average of 3-4 times a year. Again, they are very common. Every bull market has them. But if you know these are commonplace moves, you can instead look at them as opportunities to buy rather than places to sell.

For perspective, from their recent highs, the Dow is off by -4.48%, the S&P is off by -3.97%, the Nasdaq is down by -6.37%, and the Russell is down by -6.81%.

Will we see more? Possibly?

Could this have been it? That's possible too.

Either way, I'm still expecting a solid finish to the month and the year.

As I've mentioned before, in spite of the recent pullback, the AI trade is alive and well. And will likely be one of the key drivers for stocks, not only for the remainder of this year, but for years to come.

And, like the dot-com tech boom in the late 90's, I see the same thing happening now with AI.

Back then, from 1995 thru 1999, we saw 5 years in a row of 20%+ gains for the S&P. That's 5 long years of gains for a 220% increase.

Fast forward to the present: we just saw 2 years in a row of 20%+ gains (2023 was up 24.2%, and 2024 was up 23.3%). And like before, I'm expecting 3 more years of 20%+ gains, this time driven by the AI tech boom.

And with the S&P 'only' up 12.5% YTD, that leaves a lot more potential upside to go.

Let's also not forget that Q4 is the best quarter for stocks. And with it being a post-election year, there's a 72.2% likelihood of being up in November, and a 77.8% likelihood of being up in December.

In other news, Q3 earnings season 'officially' comes to an end this afternoon when NVIDIA reports after the close. All eyes will be focused on this AI bellwether, as some have worried that AI is in a bubble, or soon could be. But CEO Jensen Huang sounds as enthusiastic as ever on the prospects for AI chip and datacenter demand.

We've got a few economic reports on deck for today including MBA Mortgage Applications, the Housing Starts and Permits report, the International Trade in Goods and Services report, and the Atlanta Feb Business Inflation Expectations report.

We'll also get the FOMC Minutes from last month's Fed meeting.

The FOMC Minutes and NVIDIA's earnings are the two main events today.

See you tomorrow,