What Happened?

A number of stocks fell in the afternoon session after investors took some profits off the table as markets awaited signals on future monetary policy from the Federal Reserve's Jackson Hole symposium later in the week. The downturn in the market was largely attributed to a significant sell-off in megacap tech and chipmaker shares. Nvidia, Advanced Micro Devices (AMD), and Broadcom all saw notable drops, dragging down the VanEck Semiconductor ETF. Other major tech-related companies like Tesla, Meta Platforms, and Netflix were also under pressure. A key reason for this trend is that much of the recent market gains have been concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.

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:

• Broadcasting company iHeartMedia (NASDAQ: IHRT) fell 3.1%. Is now the time to buy iHeartMedia? Access our full analysis report here, it’s free.
• Gaming Solutions company Rush Street Interactive (NYSE: RSI) fell 3.3%. Is now the time to buy Rush Street Interactive? Access our full analysis report here, it’s free.
• Leisure Products company Clarus (NASDAQ: CLAR) fell 12.6%. Is now the time to buy Clarus? Access our full analysis report here, it’s free.
• Toys and Electronics company Funko (NASDAQ: FNKO) fell 5.8%. Is now the time to buy Funko? Access our full analysis report here, it’s free.
• Leisure Facilities company Sphere Entertainment (NYSE: SPHR) fell 3.2%. Is now the time to buy Sphere Entertainment? Access our full analysis report here, it’s free.

Zooming In On Clarus (CLAR)

Clarus’s shares are very volatile and have had 20 moves greater than 5% over the last year. But moves this big are rare even for Clarus and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 15 days ago when the stock gained 3.2% on the news that markets rebounded following a sharp sell-off in the previous trading session as weaker-than-expected U.S. jobs data fueled investor hopes for a potential interest rate cut by the Federal Reserve. The July Nonfarm Payrolls report revealed a gain of only 73,000 jobs, significantly below the 110,000 expected. Compounding the news, prior months' figures were revised downward by over 250,000 jobs. This data, indicating a cooling labor market, has led investors to dramatically increase bets on a September interest rate cut by the Federal Reserve, with the probability jumping to over 80% according to the CME FedWatch Tool. The prospect of lower borrowing costs typically stimulates economic activity and boosts consumer spending on non-essential goods and services, which directly benefits companies in the consumer discretionary space.

Clarus is down 23.4% since the beginning of the year, and at $3.50 per share, it is trading 32.4% below its 52-week high of $5.18 from December 2024. Investors who bought $1,000 worth of Clarus’s shares 5 years ago would now be looking at an investment worth $270.06.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.