What Happened?

A number of stocks fell in the afternoon session after President Donald Trump threatened to impose "massive" tariffs on Chinese products, reigniting trade war fears. 

The unexpected social media post was a stated countermeasure to Beijing's recent announcement of new export controls on rare-earth minerals. These minerals are critical components for manufacturing everything from consumer electronics to jet engines, and the news jolted a previously calm Wall Street. The renewed fears of a trade war sent all major indices into negative territory. The tech-heavy Nasdaq Composite saw the steepest decline, falling 1.7%, as investors weighed the potential impact of supply chain disruptions for key manufacturing components.

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:

• Traditional Fast Food company Krispy Kreme (NASDAQ: DNUT) fell 4.2%. Is now the time to buy Krispy Kreme? Access our full analysis report here, it’s free for active Edge members.
• Modern Fast Food company Wingstop (NASDAQ: WING) fell 3.4%. Is now the time to buy Wingstop? Access our full analysis report here, it’s free for active Edge members.
• Sit-Down Dining company The Cheesecake Factory (NASDAQ: CAKE) fell 3.3%. Is now the time to buy The Cheesecake Factory? Access our full analysis report here, it’s free for active Edge members.
• Sit-Down Dining company First Watch (NASDAQ: FWRG) fell 4.2%. Is now the time to buy First Watch? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Krispy Kreme (DNUT)

Krispy Kreme’s shares are extremely volatile and have had 38 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 14 days ago when the stock gained 3.5% on the news that a key inflation data (PCE) aligned with forecasts, bolstering hopes for continued interest rate cuts from the Federal Reserve. 

The Personal Consumption Expenditures (PCE) price index, the central bank's preferred gauge of inflation, showed a slight year-over-year increase in August but did not surprise economists. This report was met with relief on Wall Street, as it suggests inflationary pressures remain contained, giving the Federal Reserve more leeway to continue its monetary easing policy. Investors interpreted the news as a positive sign that the Fed can support the economy without risking runaway inflation. The positive sentiment helped the major indices claw back some of the losses from a recent three-day slide, with stocks rising across various sectors.

Krispy Kreme is down 65.9% since the beginning of the year, and at $3.32 per share, it is trading 73.3% below its 52-week high of $12.42 from November 2024. Investors who bought $1,000 worth of Krispy Kreme’s shares at the IPO in June 2021 would now be looking at an investment worth $158.15.

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