What Happened?
A number of stocks fell in the afternoon session after an unexpectedly sharp rise in wholesale inflation fueled concerns about rising costs and their impact on corporate profits. The primary catalyst was the July 2025 Producer Price Index (PPI), a measure of inflation at the wholesale level, which jumped 0.9% against forecasts of a 0.2% rise. This represents the most significant monthly increase in over three years, pointing to mounting cost pressures for manufacturers, with tariffs cited as a key factor. This data complicates the Federal Reserve's upcoming interest rate decisions, as persistent inflation may prevent rate cuts, creating a headwind for cyclical sectors like Industrials.
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:
- Building Materials company Resideo (NYSE: REZI) fell 3.2%. Is now the time to buy Resideo? Access our full analysis report here, it’s free.
- Automobile Manufacturing company THOR Industries (NYSE: THO) fell 3.2%. Is now the time to buy THOR Industries? Access our full analysis report here, it’s free.
- Home Construction Materials company JELD-WEN (NYSE: JELD) fell 3.1%. Is now the time to buy JELD-WEN? Access our full analysis report here, it’s free.
- Gas and Liquid Handling company Helios (NYSE: HLIO) fell 3.1%. Is now the time to buy Helios? Access our full analysis report here, it’s free.
- General Industrial Machinery company Luxfer (NYSE: LXFR) fell 3.2%. Is now the time to buy Luxfer? Access our full analysis report here, it’s free.
Zooming In On Resideo (REZI)
Resideo’s shares are quite volatile and have had 18 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 2 days ago when the stock gained 12.9% on the news that an upgrade from Morgan Stanley, which raised its rating on the stock to Overweight from Equal-Weight. The investment bank boosted its price target to $35 from a previous $24. The upgrade was driven by several positive developments, including Resideo's strong second-quarter results, which surpassed the high end of guidance and marked the best organic revenue growth in 15 quarters.
Additionally, analysts highlighted the recent cancellation of a "longstanding and complex" indemnification agreement with Honeywell. This move is seen as removing a significant structural barrier for investors and creating a clearer path to what Morgan Stanley estimates could be approximately $3 in earnings power. The company's plan to separate its ADI Global distribution business in 2026 was also noted as a potential catalyst for unlocking shareholder value.
Resideo is up 37.9% since the beginning of the year, and at $31.41 per share, it is trading close to its 52-week high of $32.83 from August 2025. Investors who bought $1,000 worth of Resideo’s shares 5 years ago would now be looking at an investment worth $2,266.
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