What Happened?
A number of stocks jumped in the afternoon session after the major indices popped (Nasdaq +3.4%, S&P 500 +2.5%) in response to the positive outcome of U.S.-China trade negotiations, as both sides agreed to pause some tariffs for 90 days, signaling a potential turning point in ongoing tensions. This rollback cuts U.S. tariffs on Chinese goods to 30% and Chinese tariffs on U.S. imports to 10%, giving companies breathing room to reset inventories and supply chains.
However, President Trump clarified that tariffs could go "substantially higher" if a full deal with China wasn't reached during the 90-day pause, but not all the way back to the previous levels.
Still, the agreement has cooled fears of a prolonged trade war, helping stabilize expectations for global growth and trade flows and fueling renewed optimism.
The optimism appeared concentrated in key trade-sensitive sectors, particularly technology, retail, and industrials, as lower tariffs reduce cost pressures and restore cross-border demand.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Ground Transportation company Covenant Logistics (NYSE: CVLG) jumped 10.1%. Is now the time to buy Covenant Logistics? Access our full analysis report here, it’s free.
- Ground Transportation company Landstar (NASDAQ: LSTR) jumped 7.3%. Is now the time to buy Landstar? Access our full analysis report here, it’s free.
- Rail Transportation company Norfolk Southern (NYSE: NSC) jumped 6.8%. Is now the time to buy Norfolk Southern? Access our full analysis report here, it’s free.
- Ground Transportation company Schneider (NYSE: SNDR) jumped 8.9%. Is now the time to buy Schneider? Access our full analysis report here, it’s free.
- Ground Transportation company Werner (NASDAQ: WERN) jumped 8.2%. Is now the time to buy Werner? Access our full analysis report here, it’s free.
Zooming In On Covenant Logistics (CVLG)
Covenant Logistics’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. Moves this big are rare for Covenant Logistics and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 26 days ago when the stock dropped 7.5% on the news that Federal Reserve Chair Jerome Powell signaled a cautious stance on future monetary policy decisions during a speech in Chicago, emphasizing that trade tariffs could add upward pressure to inflation in the short term and complicate the Fed's efforts to stabilize the economy. He warned that such trade measures are "likely to move us further away from our goals," referring to the Fed's dual mandate of price stability and maximum employment.
The comments did little to improve sentiment, as major indices were already in the negative territory in the morning session after Nvidia announced it might be unable to sell some high-end chips (including the H20 chips) to China due to export controls and requirements from the Trump administration. As a result, the company planned to take a $5.5 billion charge due to inventory writedowns and canceled sales.
Adding to the sector's pressure, chip tool maker ASML posted weak bookings (a key demand indicator) which fell below Wall Street's expectations, noting that tariffs had made the industry's outlook more uncertain. Taken together, these updates likely fueled investor anxiety, amplifying concerns about global trade tensions, tech sector vulnerability, and the Fed's limited room to maneuver in an increasingly uncertain macro environment.
Covenant Logistics is down 13.3% since the beginning of the year, and at $23.32 per share, it is trading 23.1% below its 52-week high of $30.33 from November 2024. Investors who bought $1,000 worth of Covenant Logistics’s shares 5 years ago would now be looking at an investment worth $5,579.
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