What Happened?

A number of stocks fell in the afternoon session after markets pulled back, reversing early gains, as investor sentiment remained cautious despite a softer-than-expected inflation reading. 

Stocks rose in the morning session after an unexpected drop in the Producer Price Index (PPI) for August signaled easing inflation and raised expectations for a potential Federal Reserve interest rate cut. The U.S. Bureau of Labor Statistics reported that the PPI, which measures wholesale prices, edged down 0.1% last month, contrary to analyst expectations for a 0.3% rise. This data gives the Federal Reserve more flexibility to consider lowering interest rates to stimulate the economy.

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:

• Shelf-Stable Food company SunOpta (NASDAQ: STKL) fell 2.8%. Is now the time to buy SunOpta? Access our full analysis report here, it’s free.
• Personal Care company The Honest Company (NASDAQ: HNST) fell 2.8%. Is now the time to buy The Honest Company? Access our full analysis report here, it’s free.

Zooming In On The Honest Company (HNST)

The Honest Company’s shares are extremely volatile and have had 36 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 7 days ago when the stock gained 3% after it appeared to rebound from a drop in the previous session that was linked to a broader market sell-off. The previous day, the stock fell amidst wider market weakness driven by concerns over economic conditions. 

A key factor influencing the downturn was a report indicating that U.S. manufacturing activity had contracted for the sixth consecutive month, raising fears about a slowing economy and causing major indices like the S&P 500 and Nasdaq to decline. With no new company-specific news today, the stock's upward movement suggests investors are buying back shares following the recent macro-driven dip.

The Honest Company is down 43.6% since the beginning of the year, and at $3.83 per share, it is trading 55.3% below its 52-week high of $8.57 from November 2024. Investors who bought $1,000 worth of The Honest Company’s shares at the IPO in May 2021 would now be looking at an investment worth $166.52.

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