What Happened?
A number of stocks jumped in the afternoon session after Iran-US peace deal progress and falling Treasury yields restored corporate confidence.
This could serve as a catalyst for CFOs to greenlight the consulting, staffing, and outsourcing contracts they had paused during the conflict. Business services companies make money on "white collar GDP." So when the macro picture improves, project backlogs unfreeze, and the firms that execute them get paid.
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:
- Digital Media & Content Platforms company Getty Images (NYSE: GETY) jumped 3.3%. Is now the time to buy Getty Images? Access our full analysis report here, it’s free.
- Electronic Components & Manufacturing company CTS (NYSE: CTS) jumped 3.6%. Is now the time to buy CTS? Access our full analysis report here, it’s free.
- IT Distribution & Solutions company Insight Enterprises (NASDAQ: NSIT) jumped 3.2%. Is now the time to buy Insight Enterprises? Access our full analysis report here, it’s free.
- IT Distribution & Solutions company Avnet (NASDAQ: AVT) jumped 3.7%. Is now the time to buy Avnet? Access our full analysis report here, it’s free.
Zooming In On Avnet (AVT)
Avnet’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 3.6% after the Dow Jones Industrial Average climbed more than 300 points and briefly touched a fresh all-time high above 50,700 as market sentiment improved amid falling yields.
Business services revenue moves with corporate confidence: when CFOs feel good, they greenlight the consulting, staffing, and outsourcing contracts they had been sitting on. Cooling Treasury yields also reduce financing costs for the mid-sized clients these firms serve, which usually translates into faster contract awards. Furthermore, the Iran peace deal progress removed a major geopolitical overhang, encouraging corporations to release the project backlogs they had paused during the conflict. Business services companies recognize revenue over multi-quarter project timelines, so today's macro relief shows up in tomorrow's earnings.
Avnet is up 80.7% since the beginning of the year, and at $89.13 per share, has set a new 52-week high. Investors who bought $1,000 worth of Avnet’s shares 5 years ago would now be looking at an investment worth $2,005.
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