What Happened?
A number of stocks jumped in the afternoon session after the latest Consumer Price Index (CPI) report came in largely as expected, reinforcing investor hopes for an upcoming Federal Reserve interest rate cut.
Data from the Bureau of Labor Statistics showed headline inflation for August at a 2.9% annual rate, with core inflation, which excludes volatile food and energy prices, holding steady at 3.1%. While inflation remains above the Federal Reserve's target, Wall Street interpreted the figures as not being high enough to prevent a widely anticipated rate reduction at the central bank's meeting next week. Analysts note that the Fed's focus has shifted toward the risks of a cooling labor market. With this report being the last key data point before the meeting, the market's conviction for a rate cut strengthened, fueling a broad rally that pushed major U.S. stock indexes to record highs.
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:
- Leisure Facilities company Topgolf Callaway (NYSE: MODG) jumped 3.4%. Is now the time to buy Topgolf Callaway? Access our full analysis report here, it’s free.
- Specialized Consumer Services company H&R Block (NYSE: HRB) jumped 3.6%. Is now the time to buy H&R Block? Access our full analysis report here, it’s free.
- Specialized Consumer Services company Mister Car Wash (NASDAQ: MCW) jumped 2.2%. Is now the time to buy Mister Car Wash? Access our full analysis report here, it’s free.
- Leisure Facilities company Planet Fitness (NYSE: PLNT) jumped 2.5%. Is now the time to buy Planet Fitness? Access our full analysis report here, it’s free.
- Leisure Facilities company AMC Entertainment (NYSE: AMC) jumped 2.2%. Is now the time to buy AMC Entertainment? Access our full analysis report here, it’s free.
Zooming In On H&R Block (HRB)
H&R Block’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 29 days ago when the stock dropped 6% on the news that the company reported mixed second-quarter results, as an earnings miss and weaker-than-expected guidance for the upcoming fiscal year overshadowed a slight revenue beat.
The tax preparation company posted adjusted earnings per share of $2.27, well below analyst expectations of $2.83. Although revenue came in slightly ahead of forecasts at $1.11 billion, the focus remained on profitability. The earnings miss was partly due to a one-time tax benefit of $0.50 per share being pushed to the next quarter. Looking ahead, H &R Block's earnings forecast for fiscal 2026 of $4.85 to $5.00 per share also fell short of consensus estimates.
H&R Block is down 1.8% since the beginning of the year, and at $52.13 per share, it is trading 19.1% below its 52-week high of $64.46 from September 2024. Investors who bought $1,000 worth of H&R Block’s shares 5 years ago would now be looking at an investment worth $3,478.
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