What Happened?
A number of stocks fell in the afternoon session after President Trump threatened a 'massive increase in tariffs' on Chinese imports, reigniting fears of a renewed US-China trade war.
The unexpected comments, made in response to Beijing's plans to tighten export controls on rare-earth minerals, reversed early market gains and sent major indices tumbling. Rare-earth minerals are crucial for components used in the electronics and automotive industries. The tech sector led the losses, with the tech-rich Nasdaq Composite falling 1.7%. The threat jolted Wall Street, sparking concerns that escalating trade tensions could disrupt global supply chains and increase costs for many technology companies that rely on components or manufacturing from China.
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:
- Hardware & Infrastructure company Xerox (NASDAQ: XRX) fell 5%. Is now the time to buy Xerox? Access our full analysis report here, it’s free for active Edge members.
- Specialized Technology company Zebra (NASDAQ: ZBRA) fell 4.9%. Is now the time to buy Zebra? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Xerox (XRX)
Xerox’s shares are extremely volatile and have had 38 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 14 days ago when the stock gained 3.3% on the news that the personal Consumption Expenditures (PCE) Price Index report aligned with economists' predictions, signaling that inflation is under control.
The Core PCE Price Index, which is closely watched by the Federal Reserve as it excludes volatile food and energy costs, rose 0.2% month-over-month and 2.9% year-over-year. These figures precisely matched Wall Street estimates. This alignment provides relief for investors and reinforces the market's belief that inflationary pressures are being managed without harming economic growth. The positive market reaction highlights a growing conviction that the Federal Reserve will likely proceed with its anticipated path of interest rate cuts, which would make capital cheaper and help stimulate further economic expansion.
Xerox is down 60.2% since the beginning of the year, and at $3.29 per share, it is trading 70.3% below its 52-week high of $11.07 from October 2024. Investors who bought $1,000 worth of Xerox’s shares 5 years ago would now be looking at an investment worth $163.03.
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