What Happened?
Shares of online fashion retailer Revolve (NASDAQ: RVLV) jumped 5.5% in the afternoon session after U.S. Federal Reserve Chair Jerome Powell hinted at potential interest rate cuts in the coming months.
The broader market surged after U.S. Federal Reserve Chair Jerome Powell, in a speech at Jackson Hole, Wyoming, suggested the door was open to lowering interest rates in the coming months. This signal sent a wave of optimism through the markets, lifting major U.S. indices, including the S&P 500 and the Nasdaq Composite.
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What Is The Market Telling Us
Revolve’s shares are very volatile and have had 24 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 dropped 3% on the news that markets pulled back as hotter-than-expected wholesale inflation data was released, raising concerns about the future path of interest rates. The U.S. Labor Department reported that the Producer Price Index (PPI), which measures inflation at the wholesale level, jumped 3.3% year-over-year in July, significantly above economists' forecasts of 2.5%. This unexpected increase suggests that cost pressures are building for businesses, which could eventually be passed on to consumers. The hotter-than-expected data prompted investors to scale back bets on an imminent interest rate cut by the Federal Reserve. Higher interest rates can dampen economic activity and negatively affect the valuations of growth-oriented stocks, such as those in the internet sector, leading to a broad market retreat.
Revolve is down 33.1% since the beginning of the year, and at $22.44 per share, it is trading 42.2% below its 52-week high of $38.80 from November 2024. Investors who bought $1,000 worth of Revolve’s shares 5 years ago would now be looking at an investment worth $1,078.
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