Last Week
Despite a decent bounce on Friday, damage was still done earlier to the equity markets thanks to the uncertainties caused by tariff talk and softening economic data. The S&P 500 slipped 1%, erasing most of the remaining gains for 2025 and leaving the index modestly in the red over the last 3 months. As a sign of difficulty for the Magnificent 7, Nvidia’s stock fell more than 8% despite posting strong quarterly results. The Nasdaq Composite declined 3.5% and is now 2.5% in the red for 2025. Small-cap performance probably best represents investor sentiment on the outlook for the U.S. economy. The verdict has been “not so great,” as the Russell 2000 dropped 1.5% and is now -6.7% since Inauguration Day 2025—thus far more of a slump than a bump.
On a positive note, there were further signs of a rotation within the equity markets rather than an across-the-board sell-off. Advancing issues modestly outpaced declining issues, with strength in the defensive Financial, Telecommunication, and Health Care sectors. Additionally, the S&P 500 Equal Weight Index posted a small gain, up almost 3% for 2025. As its title describes, the Equal Weight Index holds equal amounts of all 500 S&P stocks, thus eliminating the concentration risk of the market cap-weighted S&P 500 Index. Multiple years of narrow leadership in the stock market amongst the Magnificent 7 has led to a very high concentration of very expensive stocks in the S&P 500. As such, we encourage diversification into other sectors such as the Equal Weight Index (RSP), Mid-Caps (MDY), or Small Caps (we like the North Star Funds for active management).
Gold retreated from its record highs while the Dollar rallied. We have been favorable toward gold as a hedge against dollar weakness. The softening economic data led to a continued rally in the bond market, with the yield on the 10-year Treasury dropping 19 basis points to 4.23%, its lowest level since 2025.
The tariff drama continued as President Trump confirmed that previously delayed 25% tariffs on imports from Canada and Mexico would go into effect in March, along with an additional 10% tariff from China. In other news from Pennsylvania Avenue, a meeting with Ukraine President Volodymyr Zelenskyy ended acrimoniously with no resolution on ending the Russia-Ukraine war and no signed minerals deal.
Sentiment Indexes have slumped to their lowest levels since 2021, driven by a spike in inflation concerns. Channeling the 1974 Rufus song “Tell Me Something Good,” written by Stevie Wonder, we note that January PCE came in as expected, actually showing some modest year-over-year cooling in the Fed’s favorite inflation gauge. The other good news comes from corporate earnings, which are on track for an 18.2% year-over-year increase for the fourth quarter. That’s substantially better than the 11.2% forecasted growth at the beginning of the reporting season. Additionally, ten of the eleven industry sectors are posting positive growth, with only the Energy sector showing a decline. “Tell me that you like it.”
We like the Chicago Maroons basketball team, which finished the regular season with a win over the highly ranked Washington University Bears at a packed Ratner Center in Hyde Park on Saturday. The Maroons should be receiving a bid for the Division 3 Tournament this week. If you enjoy pure college basketball without NILs and transfer portal mercenaries, check on the Division 3 tournament. The Illini also came to life with impressive victories over Iowa and Michigan (condolences to our fellow North Star Team members who are Michigan alums).
This Week
The economic calendar is very busy with purchasing managers’ data for February on Monday, factory and durable goods order statistics for January on Wednesday, and the February jobs report on Friday. Any dramatic softening could motivate the Federal Reserve to rethink its very tight monetary policy posture.
Earnings reports from major retailers Costco and Target will provide a look at the extent to which the recent negative sentiment has affected consumer behavior.
The markets will likely continue to react to further political developments.
Stocks on the Move
+27.1% Nathan’s Famous Inc (NATH) was up in February after it was reported the company was considering a sale. The news came just a few weeks after the company posted strong quarterly earnings.
+20.9% Cantaloupe Inc (CTLP) was also up on news of a potential transaction after Reuters revealed the payments firm was “exploring options, including a sale.” Analysts believe potential buyers would be looking at the company as a synergistic add-on to expand into a new, unique market.
+13.9% Hamilton Beach Brands Holding Co (HBB) shares rose in February after reported solid Q4 revenue growth of 3.3%, driven by new premium product launches and strong holiday sales. Additionally, the company saw gross margin expand 300 bps to 26.0%, the highest in company history.
+12.4% Lincoln Educational Services Corp (LINC) was up last month after reporting strong earnings, highlighted by a 9.6% increase in student starts as there is continued high demand for skilled trades and technical trading. LINC guided for a strong 2025 and is on track to reach its 2027 revenue and EBITDA targets of $550M and $90M, respectively.
-16.7% Comfort Systems USA Inc (FIX) shares pulled back in February despite its Q4 earnings demonstrating robust revenue growth driven by institutional and industrial projects. The company’s customer base includes data centers, chip fabricators, and EV battery makers – all industries that have been subject to some uncertainty. Despite this, FIX reiterated strength in its Industrial and Technology end-markets, citing a record $6.0B backlog.
-18.3% Interface Inc (TILE) shares declined after solid earnings driven by strength in American commercial sales, offset by mixed performance in Europe, Asia, and Australia. Margins held up well, despite cost pressures. 2025 guidance reflects continued revenue growth and margin expansion supported by automation investments and supply chain efficiencies.
-18.8% Rocky Brands Inc (RCKY) posted strong earnings in the last week of February, but the market responded negatively on the potential impact of tariffs on 2025 margins.
-19.3% Axcelis Technologies Inc (ACLS) was down during the month after posting tepid Q4 earnings and soft Q1 guidance. The company expects 2H 2025 to be a rebound period, with demand in its memory segment and AI logic growth leading the recovery.
-21.9% Quest Resource Holding Corp (QRHC) was down in February on no specific company news.
-23.9% Boot Barn Holdings Inc (BOOT) shares retreated during the month despite posting in-line earnings at the end of January.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvestfunds.com.