The Leviathan roller coaster (Gary Hershorn/Getty Images)

The recovery in US stocks is all thanks to the riskiest kinds of companies

Earnings variability, volatility, and trading activity rule the roost.

5/1/25 1:31PM

The massive recovery in US stocks since reciprocal tariffs were announced is as clear a sign as any that risk appetite is back.

But just how much have traders been willing to dump or embrace risk during the S&P 500’s descent from all-time highs and swift bounce back?

Factor portfolios are a useful way to track the tale of the tape in this regard, and Bloomberg has a hefty collection of US-specific long/short factor portfolios that group stocks based on certain attributes: value, momentum, profitability, earnings variability, size, and so on.

All of these portfolios are designed to be market neutral, meaning their price action shouldn’t be driven by what the overall stock market is doing, but rather the unique characteristics of each factor.

The initial leg downward in stocks from when the S&P 500 reached an all-time high on February 19 was, unquestionably, a momentum-centric downturn. Momentum cratered, and traders sought safety in companies that were cheap, profitable, or had good dividend yields. After March 10, momentum came roaring back and high-dividend stocks slumped (as longer-term US bond yields drifted higher, which tends to reduce the relative appeal of companies that pay back their shareholders in this manner).

But focusing on which factors have led since the S&P 500’s 2025 low on April 8 is a veritable who’s who of the riskiest types of stocks; high volatility, high trading activity, and earnings variability are the top three. That comports with what we know about retail traders flexing their muscles through this maelstrom, no doubt.

Some of the stocks that are longs in all three portfolios include Tesla, Strategy, Dell, and AppLovin.

Which raises the question: is it inherently risky when stocks like this are leading the market?

Well, during the current bull market (which we’ll still say we’re in until proven otherwise!), we have scant instances of these three factors all being atop the leaderboard for most of a two-week period. Once was in late 2023, which coincided with/was followed by a brief hiccup for the overall market before the S&P 500 roared in the first quarter of the next year. The other came earlier, in February 2023, and was followed by one of your run-of-the-mill 5% to 10% pullbacks for the broad market.

Certainly nothing conclusive, but it does get the antennae up just a little.

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Hardware stocks jump thanks to server demand and record Lenovo revenue

Server stocks are rallying as Dell, Super Micro Computer, and Hewlett Packard Enterprise ride the momentum of Hong Kong-based Lenovo. The PC-maker's stock rose 19% on Friday, hitting an all-time high, on record Q4 earnings.

Powering the positive earnings report was the company's AI-related revenue, which grew 84% in the fourth quarter and now makes up for over a third of total revenue. Investors seem to think the increased demand for servers could have trickle-down effects to other companies.

"The company's results and commentary reinforced the outlook for strong AI-infrastructure demand while indicating resilient broader traditional server and storage spending," wrote Bloomberg Intelligence senior technology analyst Woo Jin Ho. "Lenovo's $21 billion AI-server pipeline and remarks that demand is outpacing supply support Dell's AI-demand momentum and point to robust orders."

AI's insatiable computing demand is reshaping the hardware industry and driving up server demand.

Dell will report first quarter earnings Thursday, May 28.

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The D-Wave 2X quantum system, is operated at the NASA Advanced Supercomputing facility's Quantum Artificial Intelligence Laboratory at NASA's Ames Research Center in Mountain View, Calif., as seen on Tuesday December 8, 2015.

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Ross Stores surges as Q1 results beat expectations, full-year guidance raised

Ross shares are rising after the company delivered strong Q1 results, with sales topping Wall Street’s projections.

The stock soared 6.3% just after the open.

Key numbers:

Earnings per share of $2.02 vs. $1.47 year over year (estimate: $1.72).
Sales of $6.01 billion, up 21% year over year (estimate: $5.61 billion).
Comparable sales growth of 17% (estimate: 8.58%).

CEO Jim Conroy attributed the results to better traffic in stores. “Customer traffic was the primary driver of the strong sales trend as compelling merchandise assortments, higher customer acquisition and engagement from our ongoing marketing initiatives, and an improved in‑store experience are resonating with shoppers.”

The company also noted that transaction volume grew across all key demographics, including “income levels, ethnicities, and age groups, including younger customers.” Sales were also likely buoyed by standard seasonal tailwinds, including consumer spending from tax refunds.

Backed by the strong quarter, the company lifted its full-year targets. Ross now projects same-store sales growth of 6% to 7%, up from the prior forecast of 3% to 4%, topping Wall Street’s estimate of 4.64%. It boosted its annual EPS guidance to a range of $7.50 to $7.74, versus the prior outlook of $7.02 to $7.36.

Ross Stores has been one of the retail sector’s standout performers this year, rising around 20% year to date as of Thursday’s close.

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Imax surges on report it’s approached entertainment companies for a sale

Imax is on pace for its best trading day since 2021 following a Wall Street Journal report that it’s exploring a sale. Shares are up more than 15% in premarket trading on Friday.

The premium screen company has reportedly approached entertainment companies for a deal, though talks are early and may not come to fruition. Imax has been boosted in recent years by its higher ticket prices — a K-shaped trend in movie theaters — and last year accounted for more than 5% of domestic box office sales.

Theatrical release windows have become a large debate in Hollywood this year, amid the bidding war between Paramount and Netflix for Warner Bros. Discovery. It’s unclear if an entertainment buyer would favor its own films for Imax over a rival’s.

In the first quarter, Imax booked $81.4 million in sales, beating Wall Street expectations but down about 6.5% from last year, when China’s “Ne Zha 2” smashed records.