What Happened?

A number of stocks jumped in the afternoon session after optimism surged over a potential trade truce between the U.S. and China. Reports of progress in trade negotiations ahead of a scheduled meeting between the two nations' presidents fueled investor confidence. An agreement would likely ease trade tensions and reduce or remove tariffs that have created economic uncertainty and higher costs for many multinational corporations. Also, optimism improved on expectations that the Federal Reserve will cut interest rates later in the week, especially after recent data showed inflation wasn't heating up as much as expected. Simply put, good news on trade, and the promise of lower borrowing costs created a powerful rally.

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:

• Sports & Outdoor Equipment Retailer company Academy Sports (NASDAQ: ASO) jumped 3.3%. Is now the time to buy Academy Sports? Access our full analysis report here, it’s free for active Edge members.
• Sports & Outdoor Equipment Retailer company Sportsman's Warehouse (NASDAQ: SPWH) jumped 4%. Is now the time to buy Sportsman's Warehouse? Access our full analysis report here, it’s free for active Edge members.
• Specialty Retail company Petco (NASDAQ: WOOF) jumped 4.6%. Is now the time to buy Petco? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Petco (WOOF)

Petco’s shares are extremely volatile and have had 53 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 7 months ago when the stock gained 35.1% on the news that the company reported impressive fourth quarter 2024 results. Sales were in line with expectations, while EBITDA came in significantly ahead. Despite the sales decline recorded during the quarter, Petco held its ground on profitability as management provided upbeat guidance for the first quarter which pointed to low single-digit sales declines but an EBITDA margin improvement, which helped ease investor concerns. All told, this was a strong quarter on the profitability front, even if top-line growth remained sluggish.

Petco is down 6.1% since the beginning of the year, and at $3.85 per share, it is trading 27.2% below its 52-week high of $5.29 from December 2024. Investors who bought $1,000 worth of Petco’s shares at the IPO in January 2021 would now be looking at an investment worth $130.95.

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