The Volatility Tightrope

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Hello Peter Anthony Hovis,

The Volatility Tightrope

Wall Street staged one of its most dramatic turnarounds of the year on Friday, as buyers emerged from the wreckage of a week that had tested the nerves of even the most seasoned investors.

Technology stocks, which had been left for dead earlier in the week, came roaring back to life as semiconductor giants led the charge. Nvidia surged 7.8% after having shed more than 10% through Thursday’s close, while Broadcom climbed 7.1% to completely erase its weekly losses.

These two chip titans alone accounted for much of the S&P 500’s upward thrust, as investors appeared to remember that the astronomical artificial intelligence spending plans from tech’s biggest names had to land somewhere.

(Photo: Bloomberg / Contributor / Getty Images, BING-JHEN HONG / Getty Images)

The cyclical trade joined the party in spectacular fashion, with airline stocks soaring on hopes that stronger consumer sentiment would translate into more travel spending. United Airlines rallied more than 9%, Delta climbed 8%, and American Airlines added nearly 8% as the sector found its wings.

Heavy machinery maker Caterpillar surged over 6% in what market watchers called its best day since April, while Boeing advanced more than 3%.

Yet the week’s final tally told a more nuanced story of a market in transition.

Despite Friday’s explosive rally, the Nasdaq still finished the week down 1.8%, while the S&P 500 eked out only a marginal 0.1% decline. The Dow, buoyed by its exposure to economically sensitive sectors, managed to post a 2.5% gain for the week, underscoring a dramatic shift in market leadership that has defined the opening weeks of 2026.

The labor market data that emerged mid-week added another layer of complexity to the narrative.

Initial jobless claims for the week ending January 31st jumped to 231,000, up 22,000 from the previous period and well above the 212,000 consensus, though analysts noted spikes in Pennsylvania and Wisconsin likely reflected regional weather disruptions.

A separate report showed layoffs announced by U.S. employers surging in January, further clouding the employment picture just days before next week’s critical nonfarm payrolls report.

(Photo: Stefani Reynolds / AFP via Getty Images)

As for the earnings season, out of 291 S&P 500 companies that have reported fourth-quarter results so far, 79% have beaten earnings estimates with an average upside surprise of 8.2%, while revenue growth has tracked at 9.25% year-over-year.

These solid fundamentals have helped support the market even as leadership rotates violently from day to day.

The week ahead promises no respite from the volatility.

Wednesday brings the January employment report, with economists forecasting payroll growth of just 70,000 jobs after recent weather disruptions and government shutdowns. Friday’s consumer price index reading will offer fresh insight into whether inflation remains “somewhat elevated” in the Federal Reserve’s estimation, potentially influencing the timeline for the next rate cut currently priced in for June.

The inflation report might be the catalyst that could reignite the bull run. A cooler-than-expected reading could put rate cuts back on the table, which would be the dream scenario for Wall Street.

Insanely Undervalued: Why the Market is Mispricing Loews

Today’s Stock Pick: Loews Corporation (L)

As mentioned in the news section, the market is clearly shifting to other sectors in the economy.

Lowes might be the perfect stock because it (1) may be undervalued and (2) has a large exposure to these sectors.

It is a diversified holding company operating in the insurance, energy, hospitality and packaging industries. Since these are different industries, it is difficult for analysts to price the stock properly.

Now, look at how undervalued it is.

Look at CNA. It is a property & casualty insurance company that is part of Loews’ holding. CNA is a publicly traded stock (which Loews owns ~92% of the stock), and it has a market cap of $13.49 billion.

Now, Loews stock is trading at a $23B market cap!

Loews also owns Broadwalk Pipelines, Loews Hotels & Co, and Altium Packaging. In other words, these three divisions are valued at ~$4.8 billion if we subtract CNA’s market cap (based on the value of Loews’ stake) from Loews’s net cash and the holding’s market cap.

The graphic below is slighly old since it was from Loews’ third-quarter earnings report:

(Source: Loews)

Do you see how insanely undervalued the stock is?

CNA generated a net income of $860 million attributable to Loews in the first nine months of 2025, as you can see in the graphic below:

(Source: Loews)

What about Broadwalk? It generated $796 million in EBITDA. And we haven’t factored in Loews Hotels and Altium Packaging.

Best of all…

Loews has an attractive capital allocation strategy because it reduced the number of total shares outstanding by 45% since 2014.

(Source: Loews)

Its track record goes back to 1971 when it reduced its shares outstanding from 1.3billion shares to 291 million shares between 1971 and 2020.

Its cash flow has been consistent since 2018. Why? A diversified business.

(Source: Loews)

Bottom line: In the environment of lofty valuations, Lowes is currently trading at a 23 P/E ratio which is attractive when we consider its strong share repurchase history and how undervalued its assets are.

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