What Happened?
A number of stocks jumped in the afternoon session after investor sentiment improved on renewed optimism that the US-China trade conflict might be nearing a resolution. According to reports, Treasury Secretary Scott Bessent reinforced this positive outlook by describing the trade war as "unsustainable," and emphasized that a potential agreement between the two economic powers "was possible." His comments signaled to markets that both sides might be motivated to seek common ground, raising expectations for reduced tariffs and more stability across markets.
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:
- Home Furniture Retailer company RH (NYSE: RH) jumped 11.1%. Is now the time to buy RH? Access our full analysis report here, it’s free.
- Shelf-Stable Food company SunOpta (NASDAQ: STKL) jumped 10.8%. Is now the time to buy SunOpta? Access our full analysis report here, it’s free.
- Personal Care company BeautyHealth (NASDAQ: SKIN) jumped 10%. Is now the time to buy BeautyHealth? Access our full analysis report here, it’s free.
- Toys and Electronics company Funko (NASDAQ: FNKO) jumped 5.6%. Is now the time to buy Funko? Access our full analysis report here, it’s free.
- Electrical Systems company Vertiv (NYSE: VRT) jumped 6.2%. Is now the time to buy Vertiv? Access our full analysis report here, it’s free.
Zooming In On RH (RH)
RH’s shares are extremely volatile and have had 31 moves greater than 5% over the last year. But moves this big are rare even for RH 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 dropped 6.1% on the news that President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth. Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy.
Meanwhile, Fed Chair Jerome Powell maintained a cautious stance the previous week, highlighting the difficulty of balancing the dual mandate of steady employment and price stability amid the escalating trade tension. Investor sentiment was further dampened by the absence of constructive progress in trade negotiations, especially US-China relations which took a turn for the worse in the previous week.
Overall, the outlook seemed more unclear heading into the first quarter 2025 earnings season, as a combination of hard to predict monetary policy and unresolved trade tensions weighed on business confidence.
RH is down 56.7% since the beginning of the year, and at $170.97 per share, it is trading 62.4% below its 52-week high of $454.52 from January 2025. Investors who bought $1,000 worth of RH’s shares 5 years ago would now be looking at an investment worth $1,342.
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