What Happened?
A number of stocks jumped in the afternoon session after a softer-than-expected inflation report fueled hopes for interest rate cuts by the Federal Reserve. The January Consumer Price Index (CPI), a key measure of inflation, rose by 0.2%, which was less than economists had forecast, with the annual rate cooling to 2.4%. This encouraging data increased market expectations for the Fed to begin cutting interest rates as early as June. The news prompted a rally in Treasuries as their yields fell. While the market's reaction was initially described as a "bumpy ride" due to concerns in other sectors, the favorable inflation data ultimately helped calm Wall Street. Lower inflation is a key prerequisite for the central bank to ease its monetary policy, which is generally supportive of stock valuations.
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:
- Footwear Retailer company Designer Brands (NYSE:DBI) jumped 10.9%. Is now the time to buy Designer Brands? Access our full analysis report here, it’s free.
- Home Furniture Retailer company RH (NYSE:RH) jumped 5.4%. Is now the time to buy RH? Access our full analysis report here, it’s free.
- Beauty and Cosmetics Retailer company Sally Beauty (NYSE:SBH) jumped 6.7%. Is now the time to buy Sally Beauty? Access our full analysis report here, it’s free.
- Apparel Retailer company American Eagle (NYSE:AEO) jumped 3.9%. Is now the time to buy American Eagle? Access our full analysis report here, it’s free.
- Department Store company Kohl's (NYSE:KSS) jumped 4.8%. Is now the time to buy Kohl's? Access our full analysis report here, it’s free.
Zooming In On Designer Brands (DBI)
Designer Brands’s shares are extremely volatile and have had 78 moves greater than 5% over the last year. But moves this big are rare even for Designer Brands and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock dropped 21.4% on the news that the company reported underwhelming first-quarter 2025 results, with sales and earnings falling short of Wall Street's estimates. The company recorded a "soft start to the year", citing "an unpredictable macro environment and deteriorating consumer sentiment." Due to the consumer spending pressure, the company withdrew its full 2025 guidance, creating more uncertainty. Overall, this was a weaker quarter.
Designer Brands is up 1.4% since the beginning of the year, but at $7.24 per share, it is still trading 15.8% below its 52-week high of $8.60 from December 2025. Investors who bought $1,000 worth of Designer Brands’s shares 5 years ago would now be looking at an investment worth $572.78.
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