What Happened?
A number of stocks jumped in the afternoon session after the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium. Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.
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:
- IT Distribution & Solutions company Avnet (NASDAQ: AVT) jumped 5.7%. Is now the time to buy Avnet? Access our full analysis report here, it’s free.
- Specialized Technology company Cognex (NASDAQ: CGNX) jumped 4.6%. Is now the time to buy Cognex? Access our full analysis report here, it’s free.
- Business Process Outsourcing & Consulting company Concentrix (NASDAQ: CNXC) jumped 4.7%. Is now the time to buy Concentrix? Access our full analysis report here, it’s free.
- IT Distribution & Solutions company Connection (NASDAQ: CNXN) jumped 5.5%. Is now the time to buy Connection? Access our full analysis report here, it’s free.
- Electronic Components & Manufacturing company Flex (NASDAQ: FLEX) jumped 4.9%. Is now the time to buy Flex? Access our full analysis report here, it’s free.
Zooming In On Avnet (AVT)
Avnet’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 10 days ago when the stock gained 3.2% on the news that a key inflation report met expectations, bolstering hopes for a Federal Reserve interest rate cut, while a separate report indicated rising optimism among small businesses. The July Consumer Price Index (CPI) report showed annual inflation holding steady at 2.7%, aligning with forecasts and increasing the probability of a Federal Reserve interest rate cut to over 94%. Lower interest rates can stimulate the economy by making it cheaper for businesses to borrow and invest. Further boosting confidence, the National Federation of Independent Business (NFIB) Small Business Optimism Index rose to a five-month high. This is a crucial indicator for the Business Services sector, as many of its companies cater to small and medium-sized enterprises. The combined positive data fueled a broad, "risk-on" sentiment, where investors favor economically sensitive sectors, leading to gains across IT services, staffing, and manufacturing.
Avnet is up 7.9% since the beginning of the year, and at $55.73 per share, it is trading close to its 52-week high of $57.69 from October 2024. Investors who bought $1,000 worth of Avnet’s shares 5 years ago would now be looking at an investment worth $1,998.
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