What Happened?
A number of stocks jumped in the afternoon session after optimism surged over a potential trade truce between the U.S. and China. Reports of progress in trade negotiations ahead of a scheduled meeting between the two nations' presidents fueled investor confidence. An agreement would likely ease trade tensions and reduce or remove tariffs that have created economic uncertainty and higher costs for many multinational corporations. Also, optimism improved on expectations that the Federal Reserve will cut interest rates later in the week, especially after recent data showed inflation wasn't heating up as much as expected. Simply put, good news on trade, and the promise of lower borrowing costs created a powerful rally.
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:
- Beverages, Alcohol, and Tobacco company Vita Coco (NASDAQ: COCO) jumped 4%. Is now the time to buy Vita Coco? Access our full analysis report here, it’s free for active Edge members.
- Personal Care company e.l.f. Beauty (NYSE: ELF) jumped 2.8%. Is now the time to buy e.l.f. Beauty? Access our full analysis report here, it’s free for active Edge members.
- Personal Care company BeautyHealth (NASDAQ: SKIN) jumped 9.4%. Is now the time to buy BeautyHealth? Access our full analysis report here, it’s free for active Edge members.
- Shelf-Stable Food company J. M. Smucker (NYSE: SJM) jumped 2.9%. Is now the time to buy J. M. Smucker? Access our full analysis report here, it’s free for active Edge members.
- Perishable Food company Freshpet (NASDAQ: FRPT) jumped 3%. Is now the time to buy Freshpet? Access our full analysis report here, it’s free for active Edge members.
Zooming In On BeautyHealth (SKIN)
BeautyHealth’s shares are extremely volatile and have had 70 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 gained 7.3% on the news that the latest Consumer Price Index (CPI) report showed inflation metrics ticking down slightly. The data, a key measure of inflation, was a welcome surprise for investors and reinforced the market's belief that the Federal Reserve will cut interest rates by 25 basis points (bps) during the next meeting. A basis point is one-hundredth of a percentage point. A lower interest rate environment is typically favorable for growth sectors like software, as it reduces borrowing costs and makes future profits more valuable in today's terms. The cooler-than-expected inflation reading prompted a strong positive reaction, with pre-market futures rocketing higher on the news.
BeautyHealth is down 8.7% since the beginning of the year, and at $1.47 per share, it is trading 44.1% below its 52-week high of $2.63 from September 2025.
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