What Happened?
A number of stocks jumped in the afternoon session after a key inflation report met expectations, bolstering hopes for a Federal Reserve interest rate cut, while a separate report indicated rising optimism among small businesses. The July Consumer Price Index (CPI) report showed annual inflation holding steady at 2.7%, aligning with forecasts and increasing the probability of a Federal Reserve interest rate cut to over 94%. Lower interest rates can stimulate the economy by making it cheaper for businesses to borrow and invest.
Further boosting confidence, the National Federation of Independent Business (NFIB) Small Business Optimism Index rose to a five-month high. This is a crucial indicator for the Business Services sector, as many of its companies cater to small and medium-sized enterprises. The combined positive data fueled a broad, "risk-on" sentiment, where investors favor economically sensitive sectors, leading to gains across IT services, staffing, and manufacturing.
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:
- Safety & Security Services company GEO Group (NYSE: GEO) jumped 3.6%. Is now the time to buy GEO Group? Access our full analysis report here, it’s free.
- Data & Business Process Services company Planet Labs (NYSE: PL) jumped 3.3%. Is now the time to buy Planet Labs? Access our full analysis report here, it’s free.
- Electronic Components & Manufacturing company Knowles (NYSE: KN) jumped 4.1%. Is now the time to buy Knowles? Access our full analysis report here, it’s free.
- Electronic Components & Manufacturing company Rogers (NYSE: ROG) jumped 6.5%. Is now the time to buy Rogers? Access our full analysis report here, it’s free.
- Terrestrial Telecommunication Services company Lumen (NYSE: LUMN) jumped 4.3%. Is now the time to buy Lumen? Access our full analysis report here, it’s free.
Zooming In On Rogers (ROG)
Rogers’s shares are somewhat volatile and have had 11 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 5 days ago when the stock gained 5.3% on the news that activist investor Starboard Value disclosed it acquired a stake of more than 9% in the engineering materials company, with plans to push for changes to boost its stock value. The hedge fund's renewed interest followed a period where Rogers' stock had declined by nearly 31% year-to-date, a drop attributed to slowing demand for electric vehicles. Starboard Value previously took a significant position in 2023, which led to the appointment of two independent directors to the company's board. Investors reacted positively to the development, as the activist's involvement signaled a potential for enhanced financial performance and overshadowed a recent analyst downgrade.
Rogers is down 24.3% since the beginning of the year, and at $74.85 per share, it is trading 33.8% below its 52-week high of $113.01 from September 2024. Investors who bought $1,000 worth of Rogers’s shares 5 years ago would now be looking at an investment worth $600.87.
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