What Happened?
A number of stocks fell in the afternoon session after markets faded the Nvidia rally in the morning session, as investors remained uncertain about future rate cuts.
While the trading day began with significant enthusiasm, pushing the Dow Jones Industrial Average up more than 700 points and the Nasdaq Composite up 2.6%, momentum quickly evaporated as the session wore on. The primary catalyst for this sharp reversal was a stronger-than-expected jobs report, which reduced the implied odds of a December interest rate cut to less than 40%. This macroeconomic anxiety overshadowed stellar corporate performance. Nvidia initially surged 5% on blockbuster earnings and CEO Jensen Huang's bullish outlook on "off the charts" demand for Blackwell chips. However, the stock eventually turned negative, acting as a heavy weight that dragged the broader indices into the red. The sell-off partly reflects a deepening caution regarding high-flying tech valuations in a "higher-for-longer" rate environment.
Consequently, investors appeared to rotate capital away from volatile growth sectors and toward defensive staples, evidenced by Walmart's 6% gain following its own earnings beat. Ultimately, the market could not sustain the morning's euphoria, as traders prioritized rate realities over AI potential.
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:
- Advertising & Marketing Services company Ibotta (NYSE:IBTA) fell 5.7%. Is now the time to buy Ibotta? Access our full analysis report here, it’s free for active Edge members.
- Specialized Technology company PAR Technology (NYSE:PAR) fell 4.4%. Is now the time to buy PAR Technology? Access our full analysis report here, it’s free for active Edge members.
- Hardware & Infrastructure company Xerox (NASDAQ:XRX) fell 3.9%. Is now the time to buy Xerox? Access our full analysis report here, it’s free for active Edge members.
- Government & Technical Consulting company Amentum (NYSE:AMTM) fell 4.9%. Is now the time to buy Amentum? Access our full analysis report here, it’s free for active Edge members.
- Electronic Components & Manufacturing company Plexus (NASDAQ:PLXS) fell 3.5%. Is now the time to buy Plexus? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Ibotta (IBTA)
Ibotta’s shares are very volatile and have had 28 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 8 days ago when the stock gained 6.2% on the news that investors continued to pile into value-oriented names amid growing valuation concerns in growth stocks.
This shift reflects growing caution over high valuations within the technology and artificial intelligence (AI) spheres. As market participants reassessed risk, they reallocated capital from growth-heavy indices, like the Nasdaq, to companies in areas like industrials and financials, which were perceived to be more reasonably priced. Contributing to the positive momentum, markets remained hopeful that a prolonged 40-day government shutdown would be over. The U.S. Senate approved a compromise funding package, which was pending a vote in the House. The potential end to the shutdown brought a sense of relief to markets.
Ibotta is down 66.6% since the beginning of the year, and at $22.25 per share, it is trading 70.8% below its 52-week high of $76.21 from December 2024. Investors who bought $1,000 worth of Ibotta’s shares at the IPO in April 2024 would now be looking at an investment worth $215.51.
While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without. Click here to access our full research report.