What Happened?

A number of stocks fell in the afternoon session after the U.S. threatened to impose "massive increases" to tariffs on China in response to new export controls from Beijing. 

The potential countermeasures follow China's decision to place new restrictions on the export of strategic minerals and related products, including rare earths, which are critical for the defense, semiconductor, and manufacturing industries. This escalation in the economic competition between the two largest global economies is fueling investor anxiety. The new tariff threats raise concerns about disruptions to global supply chains, increased material costs for manufacturers, and a potential drag on an already sluggish economy. Industrial companies are particularly sensitive to these developments as they are often cyclical and heavily reliant on international trade.

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:

• Professional Tools and Equipment company Stanley Black & Decker (NYSE: SWK) fell 5.8%. Is now the time to buy Stanley Black & Decker? Access our full analysis report here, it’s free for active Edge members.
• Renewable Energy company Enphase (NASDAQ: ENPH) fell 6.1%. Is now the time to buy Enphase? Access our full analysis report here, it’s free for active Edge members.
• Renewable Energy company EVgo (NASDAQ: EVGO) fell 5.6%. Is now the time to buy EVgo? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Enphase (ENPH)

Enphase’s shares are extremely volatile and have had 45 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 dropped 2.1% as negative news in the broader green energy sector weighed on investor sentiment. The pressure came as reports surfaced that the U.S. was investigating Waaree Energies, India's largest solar panel maker, over claims it may have evaded duties on solar cells from China. According to reports, U.S. Customs and Border Protection started a formal investigation into whether the company mislabeled Chinese-made cells as made in India to avoid tariffs. Adding to the sector's woes, solar manufacturer Saatvik Green Energy had a disappointing stock market debut, listing below its initial public offering price. This combination of a major company facing a U.S. probe and a weak reception for a new public offering created a tough environment for green energy stocks.

Enphase is down 51.9% since the beginning of the year, and at $34.35 per share, it is trading 66.1% below its 52-week high of $101.47 from October 2024. Investors who bought $1,000 worth of Enphase’s shares 5 years ago would now be looking at an investment worth $328.93.

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