What Happened?
A number of stocks fell in the afternoon session after surging oil prices and rising long-term interest rates stoked fears of a slowdown in industry orders.
The selloff followed President Donald Trump’s announcement of “Economic Warfare” against Iran, which pushed Brent crude up to $93.55 a barrel, CNBC reported. Simultaneously, the 10-year Treasury yield rose above 4.7% after FOMC minutes showed officials were willing to tighten policy if inflation did not cool.
For commercial aerospace, surging crude drives up jet fuel, a significant variable cost for airlines, while higher Treasury yields increase the financing costs for aircraft leasing. When operating margins compress, airlines typically delay fleet upgrades and defer aftermarket maintenance.Until fuel prices and borrowing costs retreat, carriers will likely freeze capital expenditures, keeping manufacturers under pressure.
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:
Zooming In On Redwire (RDW)
Redwire’s shares are extremely volatile and have had 98 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 2 days ago when the stock dropped 5.2% on the news that the latest industrial production report showed slower-than-expected growth for July.
Data from the Federal Reserve indicated that U.S. industrial production rose by 0.2%, which was half of the 0.4% increase that analysts polled by The Wall Street Journal had anticipated. While this marked the second consecutive month of growth, it represented a slowdown from the previous month’s revised figures.
