What Happened?
A number of stocks fell in the pre-market session after markets pulled back amid hotter-than-expected inflation data. The main concern for investors was the July Producer Price Index (PPI), a measure of wholesale inflation. The higher-than-expected reading suggests that companies could face squeezed profit margins due to rising costs. This also reduces the likelihood of the Federal Reserve cutting interest rates, which could further dampen economic activity. Compounding these inflation fears are multiple reports signaling a weakening consumer.
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:
- Shelf-Stable Food company Utz (NYSE: UTZ) fell 6.6%. Is now the time to buy Utz? Access our full analysis report here, it’s free.
- Personal Care company Estée Lauder (NYSE: EL) fell 6.5%. Is now the time to buy Estée Lauder? Access our full analysis report here, it’s free.
- Beverages, Alcohol, and Tobacco company MGP Ingredients (NASDAQ: MGPI) fell 3%. Is now the time to buy MGP Ingredients? Access our full analysis report here, it’s free.
- Shelf-Stable Food company B&G Foods (NYSE: BGS) fell 4.1%. Is now the time to buy B&G Foods? Access our full analysis report here, it’s free.
- Perishable Food company Beyond Meat (NASDAQ: BYND) fell 3.4%. Is now the time to buy Beyond Meat? Access our full analysis report here, it’s free.
Zooming In On Utz (UTZ)
Utz’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 3.4% on the news that markets continued to rally as a surprisingly subdued inflation report fueled hopes for an imminent interest rate cut from the U.S. Federal Reserve. The July Consumer Price Index (CPI) report showed a year-over-year increase of 2.7%, which was slightly below market expectations. This tamer-than-expected inflation data was viewed by investors as a key signal that price pressures are easing. As a result, the market has strengthened its conviction that the U.S. Federal Reserve will implement an interest rate cut in September. The prospect of lower borrowing costs tends to boost corporate profitability and can stimulate economic activity, creating a more favorable environment for consumer-facing companies and fueling a broad-based market rally.
Utz is down 11% since the beginning of the year, and at $13.48 per share, it is trading 27.5% below its 52-week high of $18.60 from September 2024. Investors who bought $1,000 worth of Utz’s shares 5 years ago would now be looking at an investment worth $983.22.
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