What Happened?
Shares of young adult apparel retailer Abercrombie & Fitch (NYSE: ANF) jumped 7.8% in the afternoon session after the Federal Reserve delivered its third and final interest rate cut of the year, lowering the federal funds rate by 25 basis points (0.25%) to a 3.50%-3.75% range.
This dovish action, combined with highly accommodating signals from Chair Jerome Powell and the Federal Open Market Committee (FOMC), sent the Dow Jones Industrial Average and S&P 500 surging. The market's bullish reaction was rooted in several key takeaways from the Fed's announcement. Most significantly, the central bank confirmed it would begin expanding its balance sheet by buying short-term bonds, a move that injects critical liquidity and lowers short-term Treasury yields. Furthermore, the Fed signaled a shift in priority by removing language that described the labor market as "remaining low," suggesting it would be more focused on supporting economic growth. While the Fed's official forecast projected only one cut for the next year, traders immediately priced in the expectation of more aggressive easing, banking on at least two rate reductions. This widespread anticipation of sustained, low borrowing costs and the virtual certainty that rate hikes would be off the table boosted corporate valuations and created powerful momentum for the equity market rally.
The shares closed the day at $107.06, up 7.1% from previous close.
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What Is The Market Telling Us
Abercrombie and Fitch’s shares are extremely volatile and have had 34 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 15 days ago when the stock gained 32.7% on the news that the company reported third-quarter results that beat analyst expectations and provided an encouraging full-year earnings outlook. The apparel retailer posted sales of $1.29 billion, a 6.8% increase from the previous year, which narrowly surpassed Wall Street's forecasts. The more significant surprise came from profitability, with GAAP earnings of $2.36 per share exceeding consensus estimates by 9.4%, driven by a 3% rise in same-store sales. Looking ahead, Abercrombie & Fitch’s full-year earnings guidance, with a midpoint of $10.35 per share, also topped analyst expectations. The strong profit performance and optimistic earnings forecast fueled investor confidence in the company's outlook.
Abercrombie and Fitch is down 30.2% since the beginning of the year, and at $107 per share, it is trading 33.5% below its 52-week high of $160.92 from January 2025. Investors who bought $1,000 worth of Abercrombie and Fitch’s shares 5 years ago would now be looking at an investment worth $4,956.
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