What Happened?
A number of stocks jumped in the afternoon session after markets rebounded following a sharp sell-off in the previous trading session as a weaker-than-expected U.S. jobs report fueled speculation that the Federal Reserve will cut interest rates in September. The July Nonfarm Payrolls (NFP) report revealed a significant slowdown in the labor market, with the economy adding only 73,000 jobs, well below the anticipated 110,000. Furthermore, data for May and June was revised downwards, indicating 250,000 fewer jobs were created than initially reported. This weaker economic data has led investors to increase their bets on a potential interest rate cut by the Federal Reserve. According to the CME FedWatch Tool, the probability of a rate cut in September has surged to over 80%. Lower interest rates are generally seen as a positive for growth-oriented stocks, as they can boost economic activity and increase the present value of future earnings, fueling broad-based rallies in sectors like technology.
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:
- Social Networking company Snap (NYSE: SNAP) jumped 3.5%. Is now the time to buy Snap? Access our full analysis report here, it’s free.
- Consumer Subscription company Duolingo (NASDAQ: DUOL) jumped 3.3%. Is now the time to buy Duolingo? Access our full analysis report here, it’s free.
- Consumer Subscription company Udemy (NASDAQ: UDMY) jumped 3.1%. Is now the time to buy Udemy? Access our full analysis report here, it’s free.
- Consumer Subscription company Coursera (NYSE: COUR) jumped 3.2%. Is now the time to buy Coursera? Access our full analysis report here, it’s free.
- Online Marketplace company Teladoc (NYSE: TDOC) jumped 3%. Is now the time to buy Teladoc? Access our full analysis report here, it’s free.
Zooming In On Snap (SNAP)
Snap’s shares are very volatile and have had 25 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 4 days ago when the stock gained 3.1% on the news that a broad rally in the technology sector, sparked by blockbuster earnings from giants Meta and Microsoft. The technology sector rallied after market giants Meta and Microsoft reported blowout quarterly results, signaling that their massive investments in artificial intelligence paid off. Both companies far exceeded Wall Street's expectations, with Meta's revenue jumping thanks to AI-fueled growth in its advertising business. The powerful results from these two behemoths created a wave of positive sentiment that lifted other internet and technology stocks, as investors anticipated continued growth and innovation in the AI space.
Snap is down 16.6% since the beginning of the year, and at $9.38 per share, it is trading 27.1% below its 52-week high of $12.86 from December 2024. Investors who bought $1,000 worth of Snap’s shares 5 years ago would now be looking at an investment worth $430.84.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
