What Happened?
A number of stocks jumped in the afternoon session after the latest Consumer Price Index (CPI) report showed inflation holding steady, bolstering investor optimism for a potential interest rate cut by the Federal Reserve.
The data, which revealed that inflation remained at 2.7% for the year ending in July, was seen as a positive sign by investors. This stability increases the likelihood that the Federal Reserve might lower interest rates at its upcoming September meeting. Lower interest rates can stimulate the economy by making borrowing cheaper for both consumers and businesses, which often translates into higher consumer spending. This is particularly beneficial for the Consumer Discretionary sector, which includes companies selling non-essential goods and services like apparel, travel, and electronics.
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:
- Apparel and Accessories company G-III (NASDAQ:GIII) jumped 3.5%. Is now the time to buy G-III? Access our full analysis report here, it’s free.
- Wireless, Cable and Satellite company Cable One (NYSE:CABO) jumped 6.5%. Is now the time to buy Cable One? Access our full analysis report here, it’s free.
- Casino Operator company Golden Entertainment (NASDAQ:GDEN) jumped 4.2%. Is now the time to buy Golden Entertainment? Access our full analysis report here, it’s free.
- Specialized Consumer Services company LKQ (NASDAQ:LKQ) jumped 3.1%. Is now the time to buy LKQ? Access our full analysis report here, it’s free.
- Footwear company Wolverine Worldwide (NYSE:WWW) jumped 3.3%. Is now the time to buy Wolverine Worldwide? Access our full analysis report here, it’s free.
Zooming In On Cable One (CABO)
Cable One’s shares are extremely volatile and have had 31 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 14 days ago when the stock dropped 3.7% on the news that the latest U.S. consumer confidence report revealed underlying weakness despite a headline increase, raising concerns about future spending. While the Conference Board's headline Consumer Confidence Index rose to 97.2 in July, the details painted a more cautious picture for investors. The Present Situation Index, a measure of consumers' assessment of current business and labor market conditions, actually fell. More telling for the sector, the report showed a decline in buying intentions for major discretionary items such as homes, cars, and most appliances. This combination of factors signals potential weakness in future consumer spending, casting a shadow over companies that rely on non-essential purchases.
Cable One is down 63.4% since the beginning of the year, and at $133.65 per share, it is trading 68.6% below its 52-week high of $425.99 from November 2024. Investors who bought $1,000 worth of Cable One’s shares 5 years ago would now be looking at an investment worth $71.66.
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