What Happened?
A number of stocks fell in the afternoon session after the major indices pulled back (Nasdaq -1.3%, S&P 500 - 1.4%) as Treasury yields rose, reflecting market anxiety over a draft federal budget that could worsen the already wide US fiscal deficit.
A poor auction for 20-year U.S. Treasury bonds further raised concerns, as weak demand implies investors are becoming more cautious about holding long-dated U.S. debt.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates (yields), investors can apply higher valuations to their stocks; when yields rise, that math works in reverse.
Adding to the cautious mood were earnings results from retail giants Target and Lowe's, both of which reported weak earnings that missed expectations, pointing to a potential slowdown in consumer spending and further weighing on sentiment.
Lastly, some influential voices such as Jamie Dimon (JPMorgan) and Steve Cohen (Point72) have made cautious comments about market, which can sometimes become self-fulfilling prophecies as investors increase their cautiousness and skittishness.
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:
- Testing & Diagnostics Services company Guardant Health (NASDAQ:GH) fell 7.4%. Is now the time to buy Guardant Health? Access our full analysis report here, it’s free.
- Healthcare Technology for Providers company Evolent Health (NYSE:EVH) fell 6.6%. Is now the time to buy Evolent Health? Access our full analysis report here, it’s free.
- Drug Development Inputs & Services company Charles River Laboratories (NYSE:CRL) fell 5.7%. Is now the time to buy Charles River Laboratories? Access our full analysis report here, it’s free.
- Research Tools & Consumables company Avantor (NYSE:AVTR) fell 5.6%. Is now the time to buy Avantor? Access our full analysis report here, it’s free.
- Terrestrial Telecommunication Services company Lumen (NYSE:LUMN) fell 5%. Is now the time to buy Lumen? Access our full analysis report here, it’s free.
Zooming In On Guardant Health (GH)
Guardant Health’s shares are extremely volatile and have had 46 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 biggest move we wrote about over the last year was about 1 month ago when the stock dropped 5.3% on the news that 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.
Guardant Health is up 17.2% since the beginning of the year, but at $37.25 per share, it is still trading 25.4% below its 52-week high of $49.94 from January 2025. Investors who bought $1,000 worth of Guardant Health’s shares 5 years ago would now be looking at an investment worth $388.59.
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