What Happened?
A number of stocks jumped in the morning session after President Trump clarified that he had no intention of removing Federal Reserve Chair Jerome Powell, a statement that helped calm markets. Earlier remarks had sparked fears of political interference in decision making at the central bank. With Trump walking back his earlier comments, investors likely felt more assured that monetary policy decisions would continue to be guided by data, not drama. That kept the Fed's word credible, and more importantly, gave investors a steadier compass to figure out where rates and the markets were headed next.
Adding to the positive news, the president made constructive comments on US-China trade talks, noting that the tariffs imposed on China were "very high, and it won't be that high. ... No, it won't be anywhere near that high. It'll come down substantially. But it won't be zero."
Also, a key force at the center of the stock market's massive two-day rally was the frantic behavior of short sellers covering their losses. Hedge fund short sellers recently added more bearish wagers in both single stocks and securities tied to macro developments after the whipsaw early April triggered by President Donald Trump's tariff rollout and abrupt 90-day pause, according to Goldman Sachs' prime brokerage data. The increased short position in the market created an environment prone to dramatic upswings due to this artificial buying force.
A short seller borrows an asset and quickly sells it; when the security decreases in price, they buy it back more cheaply to profit from the difference.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, following stocks were impacted:
- Electronic Components & Manufacturing company Coherent (NYSE: COHR) jumped 12.3%. Is now the time to buy Coherent? Access our full analysis report here, it’s free.
- Aerospace company Rocket Lab (NASDAQ: RKLB) jumped 10.5%. Is now the time to buy Rocket Lab? Access our full analysis report here, it’s free.
- Hardware & Infrastructure company Super Micro (NASDAQ: SMCI) jumped 11.2%. Is now the time to buy Super Micro? Access our full analysis report here, it’s free.
- Hardware & Infrastructure company Dell (NYSE: DELL) jumped 9.3%. Is now the time to buy Dell? Access our full analysis report here, it’s free.
- Electronic Components & Manufacturing company Flex (NASDAQ: FLEX) jumped 8.2%. Is now the time to buy Flex? Access our full analysis report here, it’s free.
Zooming In On Coherent (COHR)
Coherent’s shares are extremely volatile and have had 47 moves greater than 5% over the last year. But moves this big are rare even for Coherent and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 6.6% on the news that investor sentiment improved on renewed optimism that the US-China trade conflict might be nearing a resolution. According to reports, Treasury Secretary Scott Bessent reinforced this positive outlook by describing the trade war as "unsustainable," and emphasized that a potential agreement between the two economic powers "was possible." His comments signaled to markets that both sides might be motivated to seek common ground, raising expectations for reduced tariffs and more stability across markets.
Coherent is down 40.5% since the beginning of the year, and at $59.86 per share, it is trading 46.6% below its 52-week high of $112.02 from December 2024. Investors who bought $1,000 worth of Coherent’s shares 5 years ago would now be looking at an investment worth $2,016.
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