What Happened?
A number of stocks jumped in the morning session after President Trump clarified that he had no intention of removing Federal Reserve Chair Jerome Powell, a statement that helped calm markets. Earlier remarks had sparked fears of political interference in decision making at the central bank. With Trump walking back his earlier comments, investors likely felt more assured that monetary policy decisions would continue to be guided by data, not drama. That kept the Fed's word credible, and more importantly, gave investors a steadier compass to figure out where rates and the markets were headed next.
Adding to the positive news, the president made constructive comments on US-China trade talks, noting that the tariffs imposed on China were "very high, and it won't be that high. ... No, it won't be anywhere near that high. It'll come down substantially. But it won't be zero."
Also, a key force at the center of the stock market's massive two-day rally was the frantic behavior of short sellers covering their losses. Hedge fund short sellers recently added more bearish wagers in both single stocks and securities tied to macro developments after the whipsaw early April triggered by President Donald Trump's tariff rollout and abrupt 90-day pause, according to Goldman Sachs' prime brokerage data. The increased short position in the market created an environment prone to dramatic upswings due to this artificial buying force.
A short seller borrows an asset and quickly sells it; when the security decreases in price, they buy it back more cheaply to profit from the difference.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, following stocks were impacted:
- Hardware & Infrastructure company Pure Storage (NYSE: PSTG) jumped 7.7%. Is now the time to buy Pure Storage? Access our full analysis report here, it’s free.
- Data Analytics company Health Catalyst (NASDAQ: HCAT) jumped 10%. Is now the time to buy Health Catalyst? Access our full analysis report here, it’s free.
- Processors and Graphics Chips company AMD (NASDAQ: AMD) jumped 8.1%. Is now the time to buy AMD? Access our full analysis report here, it’s free.
- Memory Semiconductors company Micron (NASDAQ: MU) jumped 6.8%. Is now the time to buy Micron? Access our full analysis report here, it’s free.
- Semiconductor Manufacturing company FormFactor (NASDAQ: FORM) jumped 7.3%. Is now the time to buy FormFactor? Access our full analysis report here, it’s free.
Zooming In On Health Catalyst (HCAT)
Health Catalyst’s shares are extremely volatile and have had 45 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 biggest move we wrote about over the last year was 9 months ago when the stock gained 40.1% on the news that the company reported strong second-quarter 2024 results that narrowly topped analysts' revenue expectations, while EPS beat by a more convincing margin. Adjusted EBITDA and Free cash flow also beat Wall Street's estimates during the quarter.
On the other hand, its revenue guidance for the next quarter missed analysts' expectations, and its gross margin shrank. Overall, this was a mixed, yet decent quarter for the company.
Health Catalyst is down 45.1% since the beginning of the year, and at $4.03 per share, it is trading 55.4% below its 52-week high of $9.02 from December 2024. Investors who bought $1,000 worth of Health Catalyst’s shares 5 years ago would now be looking at an investment worth $154.57.
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