What Happened?
A number of stocks jumped in the afternoon session after key inflation data (PCE) aligned with forecasts, bolstering hopes for continued interest rate cuts from the Federal Reserve.
The Personal Consumption Expenditures (PCE) price index, the central bank's preferred gauge of inflation, showed a slight year-over-year increase in August but did not surprise economists. This report was met with relief on Wall Street, as it suggests inflationary pressures remain contained, giving the Federal Reserve more leeway to continue its monetary easing policy. Investors interpreted the news as a positive sign that the Fed can support the economy without risking runaway inflation. The positive sentiment helped the major indices claw back some of the losses from a recent three-day slide, with stocks rising across various sectors.
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:
- Leisure Facilities company United Parks & Resorts (NYSE: PRKS) jumped 3.5%. Is now the time to buy United Parks & Resorts? Access our full analysis report here, it’s free.
- Leisure Facilities company Topgolf Callaway (NYSE: MODG) jumped 2.8%. Is now the time to buy Topgolf Callaway? Access our full analysis report here, it’s free.
- Leisure Products company Ruger (NYSE: RGR) jumped 3.7%. Is now the time to buy Ruger? Access our full analysis report here, it’s free.
- Education Services company Lincoln Educational (NASDAQ: LINC) jumped 2.1%. Is now the time to buy Lincoln Educational? Access our full analysis report here, it’s free.
Zooming In On Ruger (RGR)
Ruger’s shares are not very volatile and have only had 4 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 3 days ago when the stock gained 6.3% on the news that Beretta Holding S.A. disclosed its acquisition of a significant stake in the company, signaling a potential for future collaboration.
The European firearms maker reported buying 1,250,100 shares of Ruger for about $45.9 million, giving it a 7.735% ownership position. Beretta stated it acquired the shares using its working capital and, while not currently seeking to take control of Ruger, it planned to open talks with management about potential business and strategic partnerships. This news seemed to overshadow developments in Canada, where the government was set to announce details of its compensation program for outlawed assault-style firearms. A gun-control group there also pushed for the inclusion of the SKS rifle in the ban, highlighting ongoing regulatory pressures within the industry.
Ruger is up 24.2% since the beginning of the year, and at $43.28 per share, has set a new 52-week high. Investors who bought $1,000 worth of Ruger’s shares 5 years ago would now be looking at an investment worth $697.19.
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