Stock Story -
What Happened: Shares of social network Snapchat (NYSE: SNAP) jumped 5.3% in the morning session after the Bureau of Labor Statistics reported that the US producer price index (PPI - prices that businesses charge for their goods and services) in July 2024 increased 2.2% year on year, falling compared to the 2.7% y/y growth recorded in the previous month. The report also revealed a month-on-month growth of 0.1%, below analysts' estimates of 0.2%. In addition, Core PPI (prices excluding food and energy) were flat month on month. PPI is often considered a leading indicator of CPI since what businesses pay tends to be passed through to consumers. Overall, the data confirmed that inflation is cooling off. This is a favorable data point supporting an interest rate cut by the Fed. Notably, markets expect the first rate cut to be announced during the September 2024 policy meeting.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market. After the initial pop the shares cooled down to $9.36, up 3.8% from previous close.
Is now the time to buy Snap? Find out by reading the original article on StockStory, it’s free.
What is the market telling us: Snap (NYSE:SNAP)'s shares are very volatile and over the last year have had 18 moves greater than 5%. In context of that, today’s move is indicating 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 8 days ago, when the company dropped 9.2% as markets continued to decline. Yields also retreated as worries about a US recession grew. The declines followed volatility on Friday, August 2, when the July Non-Farm Payrolls data revealed weaker job growth as the unemployment rate rose. Markets might also be concerned that the Fed is behind in cutting rates, with the Federal Open Market Committee leaving rates steady at 5.25%-5.50% during the July 2024 meeting. For example, respected economist and University of Pennsylvania professor Jeremy Siegel took an aggressive stance, calling on the Fed to make an emergency 75 basis-point cut in the federal funds rate after the disappointing jobs report.
Snap is down 42.1% since the beginning of the year, and at $9.36 per share it is trading 46.4% below its 52-week high of $17.45 from February 2024. Investors who bought $1,000 worth of Snap's shares 5 years ago would now be looking at an investment worth $549.90.
![Why Is Snap (SNAP) Stock Rocketing Higher Today](https://d68-invdn-com.investing.com/content/pic436c4d67ce83cb454d5a4c48330f5dde.jpeg)