What Happened?
A number of stocks fell in the afternoon session after the broader U.S. stock market declined amid investor caution and a pullback in technology stocks.
The main story? Investors are cashing in on a good run and feeling a bit cautious. After a fantastic run, many of those high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced.
There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.
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:
- Automobile Manufacturing company Lucid (NASDAQ: LCID) fell 7.9%. Is now the time to buy Lucid? Access our full analysis report here, it’s free for active Edge members.
- Defense Contractors company BWX (NYSE: BWXT) fell 9.7%. Is now the time to buy BWX? Access our full analysis report here, it’s free for active Edge members.
- Aerospace company Redwire (NYSE: RDW) fell 6.2%. Is now the time to buy Redwire? Access our full analysis report here, it’s free for active Edge members.
- Energy Products and Services company Ameresco (NYSE: AMRC) fell 6.3%. Is now the time to buy Ameresco? Access our full analysis report here, it’s free for active Edge members.
- Ground Transportation company RXO (NYSE: RXO) fell 11.9%. Is now the time to buy RXO? Access our full analysis report here, it’s free for active Edge members.
Zooming In On RXO (RXO)
RXO’s shares are extremely volatile and have had 34 moves greater than 5% over the last year. But moves this big are rare even for RXO and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 6.2% on the nsews that Morgan Stanley upgraded the stock's rating from Equal-Weight to Overweight and set a new price target of $19.00. The upgrade from analyst Ravi Shanker provided a positive signal for investors. This action followed a notable insider purchase just a few days prior, where director Thomas A. Szlosek acquired over 20,000 shares for a total of approximately $251,209. Such a purchase often indicates strong confidence from company leadership. The positive sentiment from the upgrade and insider activity seemed to overshadow the company's recent third-quarter results, in which its earnings before certain costs were below expectations.
RXO is down 54.8% since the beginning of the year, and at $10.71 per share, it is trading 65.3% below its 52-week high of $30.88 from November 2024. Investors who bought $1,000 worth of RXO’s shares at the IPO in October 2022 would now be looking at an investment worth $509.76.
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