What Happened?
A number of stocks jumped in the afternoon session after yields tumbled as the Trump Administration announced a new peace deal that would lead to the reopening of the Strait of Hormuz.
Staffing firms, management consultants, technology outsourcing providers, and enterprise services companies earn revenue when clients commit to projects. That commitment requires two things: a stable macro outlook and manageable borrowing costs. The 10-year Treasury yield fell to its lowest level since mid-May as inflation fears eased. The sector had been a quiet underperformer as CFOs deferred discretionary spending in favor of waiting for clarity. That wait appears to be ending. Business services companies whose revenue is tied to enterprise activity rather than consumer spending tend to see bookings recover earlier than broader economic data suggests.
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:
- Electronic Components & Manufacturing company TTM Technologies (NASDAQ: TTMI) jumped 5.8%. Is now the time to buy TTM Technologies? Access our full analysis report here, it’s free.
- Electronic Components & Manufacturing company Rogers (NYSE: ROG) jumped 4.1%. Is now the time to buy Rogers? Access our full analysis report here, it’s free.
- Specialized Technology company Zebra (NASDAQ: ZBRA) jumped 4.6%. Is now the time to buy Zebra? Access our full analysis report here, it’s free.
Zooming In On TTM Technologies (TTMI)
TTM Technologies’s shares are extremely volatile and have had 60 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 3 days ago when the stock gained 4.3% on the news that the prospect of a US-Iran peace deal removed a geopolitical risk premium that had frozen corporate spending decisions for months, the key input that staffing, consulting, and professional services firms bill against.
The mechanism here runs through client budgets rather than commodity prices. War-driven inflation pushed the 10-year yield to levels where rate hike bets were priced above 50%, tightening the credit conditions that clients need to invest in outsourced services and workforce expansion. The yield decline and the halving of rate-hike odds to 36% directly ease those constraints. The Russell 2000's gain, leading all major indexes, captured this logic most clearly: small and mid-cap business services companies are the most rate-sensitive, most domestically-focused, and most dependent on client confidence to win new work.
TTM Technologies is up 191% since the beginning of the year, and at $205.49 per share, it has set a new 52-week high. Investors who bought $1,000 worth of TTM Technologies’s shares 5 years ago would now be looking at an investment worth $13,736.
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