What Happened?
A number of stocks jumped in the morning session after markets rebounded following a sharp sell-off in the previous trading session as weaker-than-expected U.S. jobs data fueled investor hopes for a potential interest rate cut by the Federal Reserve.
The July Nonfarm Payrolls report revealed a gain of only 73,000 jobs, significantly below the 110,000 expected. Compounding the news, prior months' figures were revised downward by over 250,000 jobs. This data, indicating a cooling labor market, has led investors to dramatically increase bets on a September interest rate cut by the Federal Reserve, with the probability jumping to over 80% according to the CME FedWatch Tool. The prospect of lower borrowing costs typically stimulates economic activity and boosts consumer spending on non-essential goods and services, which directly benefits companies in the consumer discretionary space.
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:
- Toys and Electronics company Funko (NASDAQ:FNKO) jumped 3.3%. Is now the time to buy Funko? Access our full analysis report here, it’s free.
- Consumer Electronics company GoPro (NASDAQ:GPRO) jumped 3.2%. Is now the time to buy GoPro? Access our full analysis report here, it’s free.
- Real Estate Services company The Real Brokerage (NASDAQ:REAX) jumped 3.7%. Is now the time to buy The Real Brokerage? Access our full analysis report here, it’s free.
- Apparel and Accessories company ThredUp (NASDAQ:TDUP) jumped 8.2%. Is now the time to buy ThredUp? Access our full analysis report here, it’s free.
- Real Estate Services company eXp World (NASDAQ:EXPI) jumped 6.5%. Is now the time to buy eXp World? Access our full analysis report here, it’s free.
Zooming In On ThredUp (TDUP)
ThredUp’s shares are extremely volatile and have had 74 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 6 days ago when the stock dropped 3.2% after 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.
ThredUp is up 563% since the beginning of the year, and at $9.35 per share, has set a new 52-week high. Investors who bought $1,000 worth of ThredUp’s shares at the IPO in March 2021 would now be looking at an investment worth $467.25.
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