What Happened?
A number of stocks jumped in the afternoon session after a softened tone from President Donald Trump on U.S.-China relations boosted investor sentiment. The positive shift followed a weekend post on Truth Social where Trump stated, "Don't worry about China, it will all be fine!" and expressed a desire to help rather than hurt the country's economy. This statement provided significant relief to markets that had ended the prior week with steep losses. In response, the Nasdaq Composite jumped 2.2%, the S&P 500 gained 1.6%, and the Dow Jones Industrial Average closed 1.3% higher, as investors' fears of escalating trade tensions subsided.
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:
- Professional Tools and Equipment company Kennametal (NYSE: KMT) jumped 4.3%. Is now the time to buy Kennametal? Access our full analysis report here, it’s free for active Edge members.
- Electrical Systems company Methode Electronics (NYSE: MEI) jumped 4.6%. Is now the time to buy Methode Electronics? Access our full analysis report here, it’s free for active Edge members.
- Electrical Systems company Thermon (NYSE: THR) jumped 2.5%. Is now the time to buy Thermon? Access our full analysis report here, it’s free for active Edge members.
- Professional Tools and Equipment company Hyster-Yale Materials Handling (NYSE: HY) jumped 4.4%. Is now the time to buy Hyster-Yale Materials Handling? Access our full analysis report here, it’s free for active Edge members.
- General Industrial Machinery company Luxfer (NYSE: LXFR) jumped 4.2%. Is now the time to buy Luxfer? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Methode Electronics (MEI)
Methode Electronics’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 3 days ago when the stock dropped 3.9% on the news that the U.S. threatened to impose "massive increases" to tariffs on China in response to new export controls from Beijing. The potential countermeasures follow China's decision to place new restrictions on the export of strategic minerals and related products, including rare earths, which are critical for the defense, semiconductor, and manufacturing industries. This escalation in the economic competition between the two largest global economies is fueling investor anxiety. The new tariff threats raise concerns about disruptions to global supply chains, increased material costs for manufacturers, and a potential drag on an already sluggish economy. Industrial companies are particularly sensitive to these developments as they are often cyclical and heavily reliant on international trade.
Methode Electronics is down 38.5% since the beginning of the year, and at $7.28 per share, it is trading 48.1% below its 52-week high of $14.02 from December 2024. Investors who bought $1,000 worth of Methode Electronics’s shares 5 years ago would now be looking at an investment worth $243.72.
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