What Happened?
A number of stocks fell in the afternoon session after President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth. Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy.
Meanwhile, Fed Chair Jerome Powell maintained a cautious stance the previous week, highlighting the difficulty of balancing the dual mandate of steady employment and price stability amid the escalating trade tension.
Investor sentiment was further dampened by the absence of constructive progress in trade negotiations, especially US-China relations which took a turn for the worse in the previous week.
Overall, the outlook seemed more unclear heading into the first quarter 2025 earnings season, as a combination of hard to predict monetary policy and unresolved trade tensions weighed on business confidence.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, following stocks were impacted:
- Construction and Maintenance Services company Comfort Systems (NYSE: FIX) fell 5.3%. Is now the time to buy Comfort Systems? Access our full analysis report here, it’s free.
- Electrical Systems company Powell (NASDAQ: POWL) fell 5.8%. Is now the time to buy Powell? Access our full analysis report here, it’s free.
- Construction and Maintenance Services company WillScot Mobile Mini (NASDAQ: WSC) fell 5%. Is now the time to buy WillScot Mobile Mini? Access our full analysis report here, it’s free.
- Engineering and Design Services company Sterling (NASDAQ: STRL) fell 6%. Is now the time to buy Sterling? Access our full analysis report here, it’s free.
- Construction and Maintenance Services company Construction Partners (NASDAQ: ROAD) fell 5.4%. Is now the time to buy Construction Partners? Access our full analysis report here, it’s free.
Zooming In On Sterling (STRL)
Sterling’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 6.7% on the news that the S&P Dow Jones Indices announced that the company would replace Patterson (which was being acquired) in the S&P SmallCap 600 index before the opening of trading on Thursday, April 17, 2025.
Being included in the index means that Sterling would likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock. We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.
Sterling is down 21.3% since the beginning of the year, and at $131.85 per share, it is trading 34.3% below its 52-week high of $200.56 from January 2025. Investors who bought $1,000 worth of Sterling’s shares 5 years ago would now be looking at an investment worth $15,993.
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