What Happened?
A number of stocks jumped in the afternoon session after weaker-than-expected U.S. employment data cooled Treasury yields, easing borrowing-cost pressure across the sector.
The Bureau of Labor Statistics reported that nonfarm payrolls rose by 29,000 in September, falling far short of the 84,000 projected by economists polled by Dow Jones. The unemployment rate increased to 4.2%, while prior-month revisions removed 60,000 jobs, according to the agency. Treasury yields slumped following the release, as traders unwound expectations for another Federal Reserve rate increase, according to CNBC.
For industrials, falling yields reduce the cost of capital on large debt loads and ease financing for buyers of heavy machinery and commercial aircraft. However, the hiring slowdown introduces cyclical vulnerability. Slower payroll expansion signals potential cooling in manufacturing activity and construction, explaining why names tied to agricultural and aerospace end markets traded more cautiously. Cheaper capital helps equipment makers and suppliers by lowering the hurdle rate for customers financing multi-year orders. Yet because industrial revenue hinges on real economic throughput, the relief from lower rates will hold only if cooling labor conditions do not broaden into cancelled projects and deferred capital spending.
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) jumped 3.3%. Is now the time to buy Terex? Access our full analysis report here, it’s free.
- Engineered Components and Systems company Regal Rexnord (NYSE: RRX) jumped 3.5%. Is now the time to buy Regal Rexnord? Access our full analysis report here, it’s free.
- Building Materials company Resideo (NYSE: REZI) jumped 3.3%. Is now the time to buy Resideo? Access our full analysis report here, it’s free.
- Construction and Maintenance Services company Comfort Systems (NYSE: FIX) jumped 3.6%. Is now the time to buy Comfort Systems? Access our full analysis report here, it’s free.
- Maintenance and Repair Distributors company WESCO (NYSE: WCC) jumped 3.6%. Is now the time to buy WESCO? Access our full analysis report here, it’s free.
Zooming In On WESCO (WCC)
WESCO’s shares are quite volatile and have had 19 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 11 months ago when the stock gained 12.9% on the news that the company reported third-quarter results that surpassed Wall Street's expectations for both revenue and profit.
The electrical and industrial products supplier announced net sales of $6.2 billion, a 12.9% increase from the same period last year and ahead of consensus estimates. A key highlight for investors was the company's organic revenue growth of 12.1%, which significantly outperformed analysts' forecasts of 7.1%. On the bottom line, WESCO's adjusted earnings per share came in at $3.92, also beating expectations. The strong performance across the board signaled robust underlying demand, leading to increased investor confidence.
WESCO is up 51.4% since the beginning of the year, and at $381.78 per share, it has set a new 52-week high. Investors who bought $1,000 worth of WESCO’s shares 5 years ago would now be looking at an investment worth $3,186.
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