What Happened?
A number of stocks jumped in the morning session after an in-line inflation report fueled hopes for interest rate cuts and the U.S. and China agreed to extend their tariff truce. The Consumer Price Index (CPI), a key measure of inflation, came in largely as expected, holding steady at 2.7% year-over-year. This reading boosted investor optimism that the Federal Reserve will have room to lower interest rates at its next meeting, which could reduce borrowing costs for companies and consumers.
Adding to the positive sentiment, the U.S. and China extended their tariff truce for another 90 days. This development alleviates concerns about renewed trade tensions, which is a significant relief for industrial companies reliant on global supply chains and international sales. Together, these events create a favorable outlook for economic growth, benefiting cyclical sectors like industrials.
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:
- Electronic Components company Allient (NASDAQ: ALNT) jumped 4.3%. Is now the time to buy Allient? Access our full analysis report here, it’s free.
- Renewable Energy company Array (NASDAQ: ARRY) jumped 3.2%. Is now the time to buy Array? Access our full analysis report here, it’s free.
- Renewable Energy company Shoals (NASDAQ: SHLS) jumped 5.9%. Is now the time to buy Shoals? Access our full analysis report here, it’s free.
- Home Construction Materials company Quanex (NYSE: NX) jumped 4.8%. Is now the time to buy Quanex? Access our full analysis report here, it’s free.
- Professional Tools and Equipment company Middleby (NASDAQ: MIDD) jumped 4%. Is now the time to buy Middleby? Access our full analysis report here, it’s free.
Zooming In On Shoals (SHLS)
Shoals’s shares are extremely volatile and have had 59 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 5 days ago when the stock gained 5.7% on the news that it received a key analyst upgrade from Roth/MKM following a strong second-quarter earnings report. The investment firm lifted its rating on the stock to 'Buy' from 'Neutral' and doubled its price target to $10.00. The upgrade followed Shoals’ announcement that its second-quarter revenue jumped 11.7% from the prior year to $110.8 million, while its earnings per share of $0.10 surpassed analyst forecasts. Bolstered by the results, Shoals also increased its full-year revenue guidance, pointing to a record order backlog which signaled robust demand for its solar energy products.
Shoals is down 22% since the beginning of the year, and at $4.72 per share, it is trading 27.4% below its 52-week high of $6.50 from September 2024. Investors who bought $1,000 worth of Shoals’s shares at the IPO in January 2021 would now be looking at an investment worth $152.23.
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