What Happened?

A number of stocks jumped in the afternoon session after the latest Producer Price Index (PPI) data showed an unexpected decline, signaling easing inflation. 

The U.S. Labor Department reported that producer prices, which measure inflation before it reaches consumers, fell by 0.1% in August. This drop was unexpected by economists and suggests that costs within the supply chain are decreasing. For industrial companies, this can be a significant positive, as it may lead to lower prices for raw materials and wholesale goods. Reduced input costs can directly improve profit margins, which is a key reason for the positive investor sentiment. The data showed core producer prices, which exclude volatile food and energy, also fell by 0.1%.

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:

• Construction and Maintenance Services company Tutor Perini (NYSE: TPC) jumped 2.7%. Is now the time to buy Tutor Perini? Access our full analysis report here, it’s free.
• Waste Management company Quest Resource (NASDAQ: QRHC) jumped 5.3%. Is now the time to buy Quest Resource? Access our full analysis report here, it’s free.
• Specialty Equipment Distributors company Custom Truck One Source (NYSE: CTOS) jumped 3.2%. Is now the time to buy Custom Truck One Source? Access our full analysis report here, it’s free.

Zooming In On Quest Resource (QRHC)

Quest Resource’s shares are extremely volatile and have had 43 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 22 days ago when the stock dropped 3.1% on the news that investors took some profits off the table as markets awaited signals on future monetary policy from the Federal Reserve's Jackson Hole symposium later in the week. The downturn in the market was largely attributed to a significant sell-off in megacap tech and chipmaker shares. Nvidia, Advanced Micro Devices (AMD), and Broadcom all saw notable drops, dragging down the VanEck Semiconductor ETF. Other major tech-related companies like Tesla, Meta Platforms, and Netflix were also under pressure. A key reason for this trend is that much of the recent market gains have been concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.

Quest Resource is down 72.8% since the beginning of the year, and at $1.73 per share, it is trading 80.9% below its 52-week high of $9.04 from September 2024. Investors who bought $1,000 worth of Quest Resource’s shares 5 years ago would now be looking at an investment worth $882.65.

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