What Happened?
Shares of beauty and waxing service franchise European Wax Center (NASDAQ: EWCZ) jumped 3.1% in the afternoon session after a cooler-than-expected inflation report fueled optimism for potential Federal Reserve rate cuts. The September Consumer Price Index (CPI) rose 3.0% year-over-year, coming in just below the 3.1% analysts had forecast. While still above the Federal Reserve's 2% target, investors interpreted the slight cooling as a sign that inflationary pressures may be easing, potentially giving the central bank room to consider interest rate cuts in the near future. Sectors that are typically sensitive to interest rates, such as real estate and utilities, saw a notable lift. Lower rates can reduce borrowing costs and increase the appeal of dividend-paying stocks, boosting investor confidence in these areas.
The shares closed the day at $3.84, up 2.3% from previous close.
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What Is The Market Telling Us
European Wax Center’s shares are extremely volatile and have had 48 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 17 days ago when the stock dropped 3.4% on the news that a confluence of negative economic data pointed to a weak economy. The latest Survey of Consumer Expectations from the New York Fed revealed that households' short-term inflation expectations rose, while their outlook on the labor market deteriorated. Consumers expressed greater concern about potential job losses and expected lower earnings growth, factors that directly impact discretionary spending. Adding to the unease, Chief Economist at Moody’s Analytics, Mark Zandi, warned that 22 states demonstrated clear signs of a recession, placing the broader U.S. economy in a precarious position. The U.S. government shutdown further dampened sentiment, threatening to weigh on incomes and purchasing power.
European Wax Center is down 39.6% since the beginning of the year, and at $3.84 per share, it is trading 55.3% below its 52-week high of $8.60 from November 2024. Investors who bought $1,000 worth of European Wax Center’s shares at the IPO in August 2021 would now be looking at an investment worth $179.52.
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