The Colours Were Already There
When Newton passed sunlight through a prism, a strip of colours appeared on the wall. The glass seemed to have done something to the light, and explaining what had happened took more work than producing the display. Other people had looked through prisms before him.
He went further, using a second prism to examine the coloured rays. His experiments helped establish that the colours were already present in the white light entering the room. The glass allowed him to separate something his eyes had been receiving as a single beam. Looking at the beam alone would never have told him what was inside it.
Friday left a fairly ugly impression. QQQ closed down about 3.5%, recovering only part of its intraday loss. Watch technology for long enough on a day like that and the entire market begins to look the same colour.
Then we put the sector heatmap in front of it. Nine of the eleven broad sectors finished the week positive. Our internal breadth readings, which track how widely strength is spreading beneath the indices, have also been improving over recent weeks. More of the market is holding up than the technology charts would lead us to expect.
Separating the light further gives us the monthly industry baskets.
On our TradeDeck screen, the ten strongest groups gained roughly 8% to 10% on average. Across the twenty weakest, the average loss was around 20%. Data Centers fell 38.9%, Quantum Computing lost 31.4%, and Semiconductors dropped more than 22%. Those thematic baskets are separate from the eleven broad sectors, and they show just how concentrated the damage has become.
We have plenty of green on the wall, alongside losses severe enough to dominate the impression we take away. The number of areas doing well and the size of the losses elsewhere answer different questions. An index gives larger companies more influence, so a hard fall in its biggest names can easily overwhelm strength across other parts of the market.
Our reading is that technology and the AI trade are carrying much of the pressure, with speculative names particularly exposed. The improving breadth gives us a reason to keep looking across the rest of the market. Nine green sectors still offer very little comfort to someone concentrated in the three baskets above.
Newton’s second prism let him examine the components separately. We will keep doing the market equivalent next week, following the groups that have held their gains and watching whether weakness in technology begins to spread. A sector that holds up through another bad day in QQQ gives us evidence of strength we would miss if we stopped at the original beam.
Here’s a look at this week’s market health, with a breakdown of index and sector performance.
📈 Free Setup: Make It Count
HBB: Hamilton Beach Brands Holding Company
What they do: A maker of small kitchen and household appliances
Why watch? US consumer confidence is at record lows, and Hamilton Beach sells exactly what households put off when money feels tight: a new blender, a better coffee maker. The stock is up about 180% in a year anyway.
Second quarter revenue was $142.6 million, up 11.6%, mostly from winning back US consumer volume lost a year earlier. Gross margin printed 54.3%, inflated by a $36.5 million refund of IEEPA tariffs, the emergency duties the Supreme Court struck down in February. Net income was $33.7 million, or $2.49 a share. Management leaves the refund out of its outlook. Even before the refund arrived, the company had been working around tariffs. It used a foreign-trade zone, a designated area where imported goods can wait without paying US duties until they enter the domestic market, spread its sourcing across more countries and raised some prices. Inventory is down 28.2% to $115.1 million, and the company has $51.5 million of net cash, compared with $38.7 million of net debt a year ago.
Excluding the refund, management expects 2026 revenue growth approaching mid-single digits and gross margin modestly above last year, up from its earlier view. Operating profit should fall by a high single-digit percentage, which is better than the low-teens decline guided before. The drop comes from spending: an extra $6 million on advertising and about $6 million of accelerated depreciation on an old IT system being replaced. Operating cash flow minus investment is still guided at $35 million to $45 million.
The spending is going into new products and new channels. Two new single-serve coffee platforms launch in the second half, and the premium Lotus line is rolling out in stages. The Eclipse blender is going into a national coffee chain, and Hamilton Beach irons and hair dryers are now in about 770 US locations of a national hotel chain. Hamilton Beach Health just had its fourth consecutive profitable quarter, is targeting 50% sales growth this year and is piloting a pill-management platform. The company is also running a three-month test of paid ads on ChatGPT’s new ad platform. Buybacks slowed sharply, to about 98,000 shares for $2 million in the quarter. When an investor asked about it on the call, the finance chief listed the shares actually available to buy among the reasons. On cash flow the stock still trades at low single-digit multiples.
Technical Outlook: This one is a bit unusual for us. Volume is low and it’s a micro-float, though not one of the dangerous ones, since its ADR is under 5%, which makes it fairly docile. With only 13.5 million shares outstanding it still needs some care, because a low-float stock can have days where a modest move is enough to hit your stop, so give stops a little more room than usual. The last earnings report sparked a push, followed by a pullback to the 10 and 20-day EMAs, which held as support, then another push, and now price is back near the same area. $31.50 is the level. It was the key resistance at the end of 2024 and kept the stock below it until the August 2026 earnings, when it was reclaimed and defended. Price is now forming a clean falling wedge a little above it, around $33, but this is still a very important zone where the stock can build a new base before the next leg up, with a very good risk-reward to work with. It’s a consumer name tied more to home furnishings, so maybe less exciting, but it sits inside retail, which remains one of the most interesting areas right now: three of the six names on this week’s list are consumer cyclicals, covering apparel, retail and home furnishings. It’s a strong stock that has held up well through this volatile stretch, in one of the most resilient parts of the market.
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