What Happened?
A number of stocks fell in the afternoon session after President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth. Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy.
Meanwhile, Fed Chair Jerome Powell maintained a cautious stance the previous week, highlighting the difficulty of balancing the dual mandate of steady employment and price stability amid the escalating trade tension. Investor sentiment was further dampened by the absence of constructive progress in trade negotiations, especially US-China relations which took a turn for the worse in the previous week.
Overall, the outlook seemed more unclear heading into the first quarter 2025 earnings season, as a combination of hard to predict monetary policy and unresolved trade tensions weighed on business confidence.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, following stocks were impacted:
- Ground Transportation company RXO (NYSE: RXO) fell 7.2%. Is now the time to buy RXO? Access our full analysis report here, it’s free.
- Specialized Medical & Nursing Services company The Ensign Group (NASDAQ: ENSG) fell 5.8%. Is now the time to buy The Ensign Group? Access our full analysis report here, it’s free.
- Outpatient & Specialty Care company LifeStance Health Group (NASDAQ: LFST) fell 7.2%. Is now the time to buy LifeStance Health Group? Access our full analysis report here, it’s free.
- Outpatient & Specialty Care company Surgery Partners (NASDAQ: SGRY) fell 6.1%. Is now the time to buy Surgery Partners? Access our full analysis report here, it’s free.
- Testing & Diagnostics Services company Guardant Health (NASDAQ: GH) fell 5.3%. Is now the time to buy Guardant Health? Access our full analysis report here, it’s free.
Zooming In On RXO (RXO)
RXO’s shares are very volatile and have had 20 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 dropped 6.1% on the news that Federal Reserve Chair Jerome Powell signaled a cautious stance on future monetary policy decisions during a speech in Chicago, emphasizing that trade tariffs could add upward pressure to inflation in the short term and complicate the Fed's efforts to stabilize the economy. He warned that such trade measures are "likely to move us further away from our goals," referring to the Fed's dual mandate of price stability and maximum employment.
The comments did little to improve sentiment, as major indices were already in the negative territory in the morning session after Nvidia announced it might be unable to sell some high-end chips (including the H20 chips) to China due to export controls and requirements from the Trump administration. As a result, the company planned to take a $5.5 billion charge due to inventory writedowns and canceled sales.
Adding to the sector's pressure, chip tool maker ASML posted weak bookings (a key demand indicator) which fell below Wall Street's expectations, noting that tariffs had made the industry's outlook more uncertain.
Taken together, these updates likely fueled investor anxiety, amplifying concerns about global trade tensions, tech sector vulnerability, and the Fed's limited room to maneuver in an increasingly uncertain macro environment.
RXO is down 47.4% since the beginning of the year, and at $12.45 per share, it is trading 61% below its 52-week high of $31.90 from November 2024. Investors who bought $1,000 worth of RXO’s shares at the IPO in October 2022 would now be looking at an investment worth $592.64.
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