What Happened?
A number of stocks jumped in the afternoon session after the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium. Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.
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:
- Electrical Systems company Powell (NASDAQ: POWL) jumped 8.1%. Is now the time to buy Powell? Access our full analysis report here, it’s free.
- Electrical Systems company Hubbell (NYSE: HUBB) jumped 3.6%. Is now the time to buy Hubbell? Access our full analysis report here, it’s free.
- Engineered Components and Systems company Applied Industrial (NYSE: AIT) jumped 4%. Is now the time to buy Applied Industrial? Access our full analysis report here, it’s free.
- Construction Machinery company Caterpillar (NYSE: CAT) jumped 4.8%. Is now the time to buy Caterpillar? Access our full analysis report here, it’s free.
- Building Materials company Carlisle (NYSE: CSL) jumped 4.5%. Is now the time to buy Carlisle? Access our full analysis report here, it’s free.
Zooming In On Powell (POWL)
Powell’s shares are extremely volatile and have had 48 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 2 days ago when the stock dropped 6.9% on the news that the major indices continued to pull back, with technology stocks accounting for most of the market's largest decliners.
A key reason for this trend is that much of the recent market gains were concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.
Despite the downturn, some analysts viewed this as an opportunity to own some of the "Core AI winners." Dan Ives of Wedbush Securities commented, "In our view, the tech bull cycle will be well intact for at least another 2-3 years, given the trillions being spent on AI infrastructure/software/chips/power/apps looking ahead. This remains our tech playbook and investor roadmap." Additionally, mixed earnings reports from retailers, such as Target, have added to the market's weakness. Investors are closely monitoring these reports for insights into the broader economic health and the potential impact of new tariffs on inflation.
Powell is up 17% since the beginning of the year, but at $267.61 per share, it is still trading 24.1% below its 52-week high of $352.37 from November 2024. Investors who bought $1,000 worth of Powell’s shares 5 years ago would now be looking at an investment worth $9,989.
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