What Happened?
A number of stocks fell in the afternoon session after the August jobs report came in significantly weaker than anticipated, sparking fears of a slowdown in consumer spending.
The U.S. economy added only 22,000 jobs last month, a stark miss from expectations, while the unemployment rate ticked up to 4.3%, its highest level since late 2021, according to the Bureau of Labor Statistics. For the restaurant industry, which relies heavily on discretionary spending, a weak labor market is a major red flag. When fewer people are employed or are worried about their job security, non-essential expenses like dining out are often the first to be cut from household budgets. The report raises concerns that consumers will tighten their belts, leading to lower traffic and sales for restaurant chains across the board.
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:
- Traditional Fast Food company Dutch Bros (NYSE: BROS) fell 7.1%. Is now the time to buy Dutch Bros? Access our full analysis report here, it’s free.
- Sit-Down Dining company Denny's (NASDAQ: DENN) fell 5.8%. Is now the time to buy Denny's? Access our full analysis report here, it’s free.
Zooming In On Dutch Bros (BROS)
Dutch Bros’s shares are very volatile and have had 29 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 dropped 4.3% on the news that markets pulled back with the decline concentrated in the tech space as investors engaged in profit-taking following a robust week that saw the S&P 500 hit a new record.
Adding to the pressure, new inflation data, specifically the Core PCE, showed an acceleration in July, signaling that rising prices remain a risk despite being in line with expectations. This confluence of factors, including market highs heading into a historically weak September, led to a pullback, with the Nasdaq Composite shedding 1.15%. While the Federal Reserve has hinted at potential rate cuts, the focus on inflation and the jobs market continues to influence investor sentiment.
Dutch Bros is up 17.6% since the beginning of the year, but at $66.25 per share, it is still trading 22.4% below its 52-week high of $85.37 from February 2025. Investors who bought $1,000 worth of Dutch Bros’s shares at the IPO in September 2021 would now be looking at an investment worth $1,805.
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