What Happened?
A number of stocks fell in the afternoon session after markets faded the Nvidia rally in the morning session, as investors remained uncertain about future rate cuts.
While the trading day began with significant enthusiasm, pushing the Dow Jones Industrial Average up more than 700 points and the Nasdaq Composite up 2.6%, momentum quickly evaporated as the session wore on. The primary catalyst for this sharp reversal was a stronger-than-expected jobs report, which reduced the implied odds of a December interest rate cut to less than 40%. This macroeconomic anxiety overshadowed stellar corporate performance. Nvidia initially surged 5% on blockbuster earnings and CEO Jensen Huang's bullish outlook on "off the charts" demand for Blackwell chips. However, the stock eventually turned negative, acting as a heavy weight that dragged the broader indices into the red. The sell-off partly reflects a deepening caution regarding high-flying tech valuations in a "higher-for-longer" rate environment.
Consequently, investors appeared to rotate capital away from volatile growth sectors and toward defensive staples, evidenced by Walmart's 6% gain following its own earnings beat. Ultimately, the market could not sustain the morning's euphoria, as traders prioritized rate realities over AI potential.
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:
- Construction Machinery company Terex (NYSE: TEX) fell 3.1%. Is now the time to buy Terex? Access our full analysis report here, it’s free for active Edge members.
- Infrastructure Distributors company Watsco (NYSE: WSO) fell 3.1%. Is now the time to buy Watsco? Access our full analysis report here, it’s free for active Edge members.
- Building Materials company Carlisle (NYSE: CSL) fell 3%. Is now the time to buy Carlisle? Access our full analysis report here, it’s free for active Edge members.
- Internet of Things company Emerson Electric (NYSE: EMR) fell 3%. Is now the time to buy Emerson Electric? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Watsco (WSO)
Watsco’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be 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 dropped 8.5% on the news that the company reported underwhelming first-quarter 2025 results. Its revenue missed significantly, and its EBITDA fell short of Wall Street's estimates. Sales fell modestly, and operating income declined by a wider margin as the business was hit by slow demand in new housing and overseas markets. Overall, this was a weaker quarter.
Watsco is down 31% since the beginning of the year, and at $323.61 per share, it is trading 43.1% below its 52-week high of $568.78 from November 2024. Investors who bought $1,000 worth of Watsco’s shares 5 years ago would now be looking at an investment worth $1,394.
Do you want to know what moves the business you care about? Add them to your StockStory watchlist and every time a stock significantly moves, we provide you with a timely explanation straight to your inbox. It’s free for active Edge members and will only take you a second.
