What Happened?
Shares of department store chain Kohl’s (NYSE: KSS) jumped 10.2% in the afternoon session after it became a focal point for retail investors amid a broader resurgence in "meme stock" trading. The stock's rally is not tied to any specific company news or fundamentals. Instead, Kohl's has recently been identified as a "meme stock," a term for shares that gain popularity among retail investors through social media and online forums. This type of trading is often driven by speculative momentum rather than traditional financial metrics like earnings. The movement is part of a broader trend seeing renewed interest in such stocks, with Kohl's joining names like AMC and GameStop. A contributing factor for this attention is often high short interest, where a significant number of investors are betting the stock price will fall. This can create a "short squeeze," a rapid price increase as short-sellers are forced to buy shares to exit their positions, further fueling the rally.
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What Is The Market Telling Us
Kohl’s shares are extremely volatile and have had 40 moves greater than 5% over the last year. But moves this big are rare even for Kohl's and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 7 days ago when the stock gained 3.5% after markets rebounded following a sharp sell-off in the previous trading session as a weaker-than-expected July jobs report fueled investor hopes for a potential interest rate cut. The U.S. economy added only 73,000 jobs in July, falling well short of the 110,000 expected by economists. This disappointing data has led to a dramatic shift in market sentiment regarding the Federal Reserve's next move. According to the CME FedWatch Tool, the probability of a September interest rate cut has surged from around 40% to over 80%. Lower interest rates generally stimulate the economy by making borrowing cheaper for consumers. This can lead to increased spending on discretionary items, such as apparel and home goods, which directly benefits consumer retail companies. The prospect of more accommodative monetary policy is therefore boosting investor confidence in the sector's outlook.
Kohl's is down 13.4% since the beginning of the year, and at $12.15 per share, it is trading 42.4% below its 52-week high of $21.10 from September 2024. Investors who bought $1,000 worth of Kohl’s shares 5 years ago would now be looking at an investment worth $522.59.
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