What Happened?

A number of stocks jumped in the afternoon session after optimism surged over a potential trade truce between the U.S. and China. 

Reports of progress in trade negotiations ahead of a scheduled meeting between the two nations' presidents fueled investor confidence. An agreement would likely ease trade tensions and reduce or remove tariffs that have created economic uncertainty and higher costs for many multinational corporations. Also, optimism improved on expectations that the Federal Reserve will cut interest rates later in the week, especially after recent data showed inflation wasn't heating up as much as expected. Simply put, good news on trade, and the promise of lower borrowing costs created a powerful rally.

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:

• Apparel Retailer company Victoria's Secret (NYSE: VSCO) jumped 3.5%. Is now the time to buy Victoria's Secret? Access our full analysis report here, it’s free for active Edge members.
• Apparel Retailer company Abercrombie and Fitch (NYSE: ANF) jumped 4.4%. Is now the time to buy Abercrombie and Fitch? Access our full analysis report here, it’s free for active Edge members.
• Home Furniture Retailer company RH (NYSE: RH) jumped 3.1%. Is now the time to buy RH? Access our full analysis report here, it’s free for active Edge members.
• Department Store company Macy's (NYSE: M) jumped 3.2%. Is now the time to buy Macy's? Access our full analysis report here, it’s free for active Edge members.
• Large-format Grocery & General Merchandise Retailer company Target (NYSE: TGT) jumped 3.2%. Is now the time to buy Target? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Abercrombie and Fitch (ANF)

Abercrombie and Fitch’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 21 days ago when the stock dropped 6.8% on the news that JPMorgan Chase downgraded the stock to Neutral from a previous Overweight rating. The investment bank also significantly cut its price target on the shares to $103 from $145. An analyst downgrade often prompts a stock price adjustment as it signals a less favorable view of the company's future prospects. This particular ratings change reflected a wider negative shift in sentiment among market analysts. Over the previous month, there was a noticeable decrease in the average price target set by analysts covering the company, indicating growing caution.

Abercrombie and Fitch is down 51.8% since the beginning of the year, and at $73.91 per share, it is trading 54.2% below its 52-week high of $161.52 from December 2024. Investors who bought $1,000 worth of Abercrombie and Fitch’s shares 5 years ago would now be looking at an investment worth $4,954.

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