What Happened?

A number of stocks fell in the afternoon session after Federal Reserve Chair Jerome Powell signaled a cautious stance on future monetary policy decisions during a speech in Chicago, emphasizing that trade tariffs could add upward pressure to inflation in the short term and complicate the Fed's efforts to stabilize the economy. He warned that such trade measures are "likely to move us further away from our goals," referring to the Fed's dual mandate of price stability and maximum employment. 

The comments did little to improve sentiment, as major indices were already in the negative territory in the morning session after Nvidia announced it might be unable to sell some high-end chips (including the H20 chips) to China due to export controls and requirements from the Trump administration. As a result, the company planned to take a $5.5 billion charge due to inventory write-downs and canceled sales. Adding to the sector's pressure, chip tool maker ASML posted weak bookings (a key demand indicator) which fell below Wall Street's expectations, noting that tariffs had made the industry's outlook more uncertain. 

Taken together, these updates likely fueled investor anxiety, amplifying concerns about global trade tensions, tech sector vulnerability, and the Fed's limited room to maneuver in an increasingly uncertain macro environment.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, following stocks were impacted:

• Renewable Energy company Sunrun (NASDAQ: RUN) fell 6.3%. Is now the time to buy Sunrun? Access our full analysis report here, it’s free.
• Leisure Facilities company Sphere Entertainment (NYSE: SPHR) fell 5.4%. Is now the time to buy Sphere Entertainment? Access our full analysis report here, it’s free.
• Home Builders company Installed Building Products (NYSE: IBP) fell 6.1%. Is now the time to buy Installed Building Products? Access our full analysis report here, it’s free.
• Leisure Facilities company AMC Entertainment (NYSE: AMC) fell 5.4%. Is now the time to buy AMC Entertainment? Access our full analysis report here, it’s free.
• Travel and Vacation Providers company American Airlines (NASDAQ: AAL) fell 6%. Is now the time to buy American Airlines? Access our full analysis report here, it’s free.

Zooming In On Sunrun (RUN)

Sunrun’s shares are extremely volatile and have had 75 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 biggest move we wrote about over the last year was 5 months ago when the stock dropped 29.3% on the news that renewable energy stocks declined as Republican party candidate Donald Trump was declared the winner of the 2024 US presidential election. 

For clean or renewable energy stocks, President-elect Trump was considered a headwind to their businesses. Specifically, his administration could lead to an overhaul of recent industry progress, including a repeal of President Biden’s Inflation Reduction Act. The IRA, as it's known, offers long-term tax credits for solar, wind, geothermal, and other renewable energy projects, often extending them for a decade. These tax credits offer stability and predictability, enabling companies to make long-term investment plans. For example, solar and wind energy developers benefit from a 30% investment tax credit (ITC), which can increase further if certain labor and domestic content standards are met.

Sunrun is down 36.1% since the beginning of the year, and at $6.53 per share, it is trading 69.7% below its 52-week high of $21.50 from August 2024. Investors who bought $1,000 worth of Sunrun’s shares 5 years ago would now be looking at an investment worth $587.31.

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