What Happened?

A number of stocks fell in the morning session after markets pulled back as hotter-than-expected wholesale inflation data was released, raising concerns about the future path of interest rates. 

The U.S. Labor Department reported that the Producer Price Index (PPI), which measures inflation at the wholesale level, jumped 3.3% year-over-year in July, significantly above economists' forecasts of 2.5%. This unexpected increase suggests that cost pressures are building for businesses, which could eventually be passed on to consumers. The hotter-than-expected data prompted investors to scale back bets on an imminent interest rate cut by the Federal Reserve. Higher interest rates can dampen economic activity and negatively affect the valuations of growth-oriented stocks, such as those in the internet sector, leading to a broad market retreat.

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:

• Online Marketplace company The RealReal (NASDAQ: REAL) fell 3.4%. Is now the time to buy The RealReal? Access our full analysis report here, it’s free.
• Consumer Subscription company Bumble (NASDAQ: BMBL) fell 13.4%. Is now the time to buy Bumble? Access our full analysis report here, it’s free.
• Online Retail company Wayfair (NYSE: W) fell 3.1%. Is now the time to buy Wayfair? Access our full analysis report here, it’s free.
• Online Retail company Revolve (NYSE: RVLV) fell 3%. Is now the time to buy Revolve? Access our full analysis report here, it’s free.
• Consumer Subscription company Chegg (NYSE: CHGG) fell 3.5%. Is now the time to buy Chegg? Access our full analysis report here, it’s free.

Zooming In On Bumble (BMBL)

Bumble’s shares are very volatile and have had 28 moves greater than 5% over the last year. But moves this big are rare even for Bumble and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 1 day ago when the stock gained 12.8% after markets continued to rally as the latest inflation data reinforced expectations for a Federal Reserve rate cut as soon as September. The latest Consumer Price Index (CPI) report for July showed inflation holding steady, reinforcing market expectations that the Federal Reserve could begin cutting interest rates as soon as September. Lower interest rates generally stimulate the economy by making borrowing cheaper for consumers and businesses. This can lead to increased consumer spending and e-commerce activity, which directly benefits online retail and marketplace companies. The positive economic outlook fueled a broad-based rally, pushing the S&P 500 and Nasdaq to new record highs and lifting most growth-oriented technology stocks.

Bumble is down 24.1% since the beginning of the year, and at $6.05 per share, it is trading 33.4% below its 52-week high of $9.08 from November 2024. Investors who bought $1,000 worth of Bumble’s shares at the IPO in February 2021 would now be looking at an investment worth $86.05.

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