What Happened?
A number of stocks jumped in the afternoon session after the University of Michigan's Consumer Sentiment Index rose for a second consecutive month, beating expectations. The preliminary July reading came in at 54.4, higher than the forecasted 51.0 and the highest level since February. This improvement was largely supported by easing gasoline prices, which has a direct impact on household budgets. The report showed that all five components of the index improved, including a significant 20% gain in buying conditions for durable goods. Higher consumer sentiment can translate to increased spending on everyday goods and services, providing a potential boost for companies in the consumer staples sector.
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:
- Personal Care company Coty (NYSE:COTY) jumped 4.6%. Is now the time to buy Coty? Access our full analysis report here, it’s free.
- Beverages, Alcohol, and Tobacco company Boston Beer (NYSE:SAM) jumped 2.6%. Is now the time to buy Boston Beer? Access our full analysis report here, it’s free.
- Beverages, Alcohol, and Tobacco company Zevia (NYSE:ZVIA) jumped 1.5%. Is now the time to buy Zevia? Access our full analysis report here, it’s free.
Zooming In On Coty (COTY)
Coty’s shares are very volatile and have had 25 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 9 days ago when the stock dropped 2.7% on the news that President Trump declared the Iran ceasefire "over" and threatened more strikes. Staples usually cushion portfolios in risk-off sessions, but two forces worked against them.
First, energy is a major input across the sector, powering manufacturing, packaging, and distribution, so a crude spike of more than 7% raises freight and production costs that squeeze margins, and companies cannot always pass those increases to already-stretched shoppers without losing volume.
Second, staples trade partly as bond proxies thanks to their steady dividends; when global government bond yields jump on inflation fears, as they did today, higher yields compete with those payouts and pressure the shares.
So while investors often hide in staples during turmoil, an inflationary oil shock is precisely the kind of disturbance that erodes both their margins and their relative yield appeal.
Coty is down 15.3% since the beginning of the year, and at $2.64 per share, it is trading 48.8% below its 52-week high of $5.15 from July 2025. Investors who bought $1,000 worth of Coty’s shares 5 years ago would now be looking at only $317.09.
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