What Happened?
Shares of telecommunications infrastructure company Lumen Technologies (NYSE: LUMN) jumped 6.3% in the afternoon session after Goldman Sachs highlighted the company as a key beneficiary of declining debt costs.
In a new report, the investment bank estimated that for every 100-basis-point (1%) reduction in the cost of debt, Lumen's earnings could see a boost of slightly more than 5%. This positive commentary comes shortly after Goldman Sachs initiated coverage on the technology company's stock with a "neutral" rating and a $4.10 price objective.
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What Is The Market Telling Us
Lumen’s shares are extremely volatile and have had 47 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 3 days ago when the stock dropped 4.6% on the news that a dismal August jobs report stoked fears of a significant economic slowdown.
The U.S. economy added a mere 22,000 jobs, falling dramatically short of the 75,000 analysts had anticipated. This figure, combined with downward revisions for the previous two months and an unemployment rate that climbed to 4.3%, painted a stark picture of a cooling labor market. The report has intensified debates on Wall Street about whether the slowdown is enough to prompt a supportive interest rate cut from the Federal Reserve, or if it's a precursor to a more serious recession. Some economists expressed significant concern, with one noting the labor market appears to have "headed off a cliff edge." The data suggests that businesses are pausing hiring amidst economic uncertainty, increasing worries about broader economic trouble ahead.
Lumen is down 9.8% since the beginning of the year, and at $5.06 per share, it is trading 50% below its 52-week high of $10.12 from November 2024. Investors who bought $1,000 worth of Lumen’s shares 5 years ago would now be looking at an investment worth $475.31.
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