What Happened?
A number of stocks fell in the afternoon session after a stronger-than-expected May jobs report fueled concerns that the Federal Reserve will keep interest rates elevated.
The U.S. economy added 172,000 nonfarm payroll jobs in May, significantly surpassing economists' expectations of around 85,000, while the unemployment rate held steady at 4.3%. This robust labor market data eases concerns of an economic slowdown but diminishes the likelihood of near-term interest rate cuts by the Federal Reserve.
A prolonged high-interest-rate environment can create headwinds for growth-oriented sectors like technology, as it pressures stock valuations by making future earnings less valuable in the present. As a result, investors recalibrated their expectations for a 'higher-for-longer' rate scenario.
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:
- Electronic Components & Manufacturing company Coherent (NYSE: COHR) fell 7.2%. Is now the time to buy Coherent? Access our full analysis report here, it’s free.
- IT Services & Consulting company IBM (NYSE: IBM) fell 6.4%. Is now the time to buy IBM? Access our full analysis report here, it’s free.
- IT Services & Consulting company DXC (NYSE: DXC) fell 7.1%. Is now the time to buy DXC? Access our full analysis report here, it’s free.
Zooming In On Coherent (COHR)
Coherent’s shares are extremely volatile and have had 55 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 3 days ago when the stock gained 17.4% on the news that it hit an all-time high following Jensen Huang's Computex keynote, in which the Nvidia CEO specifically highlighted the accelerating demand for high-speed optical connectivity inside hyperscale AI data centers.
Marvell designs the chips that manage that connectivity. Coherent builds the actual hardware, the optical transceivers and interconnects that carries the light between them. Huang's endorsement carries direct strategic weight for Coherent. Nvidia has made a disclosed strategic equity investment in the company, validating Coherent's indium phosphide optics technology as critical to next-generation AI infrastructure. At its May 6 earnings, management confirmed that demand for its AI optical transceivers is now booked out through 2028.
Coherent is up 100% since the beginning of the year, and at $388.74 per share, it is trading close to its 52-week high of $426.89 from June 2026. Investors who bought $1,000 worth of Coherent’s shares 5 years ago would now be looking at an investment worth $5,622.
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