What Happened?

A number of stocks fell in the afternoon session after President Donald Trump threatened to impose 'massive' new tariffs on Chinese goods. 

In a post on his Truth Social network, Trump stated that his administration is calculating a 'massive increase of Tariffs on Chinese products.' Trump targeted China's tightening controls on rare earth metals, which are vital components in many technology products from electric vehicles to defense systems. The threat immediately impacted the market, with the tech-heavy Nasdaq sinking 2.4% and the broader S&P 500 falling 1.7%. Such tariffs could significantly disrupt the global supply chains that many technology companies rely on for manufacturing and components. The policy uncertainty also raises fears of retaliatory measures from China, which could impact sales in a key international market for many U.S. tech firms, leading to investor concern over future profitability. 

Earlier in the week, China announced new export controls on the critical minerals. Beijing's Commerce Ministry stated that foreign suppliers now need government approval to export products containing certain rare-earth materials. These materials are essential for producing high-tech goods, including computer chips, electric vehicles, and defense technology. Analysts viewed the move as a strategic assertion of China's dominance in the global rare earth supply chain, particularly amid ongoing trade tensions.

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:

• Gig Economy company Angi (NASDAQ: ANGI) fell 3.6%. Is now the time to buy Angi? Access our full analysis report here, it’s free for active Edge members.
• Consumer Subscription company Chegg (NYSE: CHGG) fell 7.2%. Is now the time to buy Chegg? Access our full analysis report here, it’s free for active Edge members.
• Financial Technology company Coinbase (NASDAQ: COIN) fell 4.9%. Is now the time to buy Coinbase? Access our full analysis report here, it’s free for active Edge members.
• Online Marketplace company Teladoc (NYSE: TDOC) fell 4.7%. Is now the time to buy Teladoc? Access our full analysis report here, it’s free for active Edge members.
• Gig Economy company Fiverr (NYSE: FVRR) fell 2.6%. Is now the time to buy Fiverr? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Chegg (CHGG)

Chegg’s shares are extremely volatile and have had 101 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 dropped 2.7% as investors took a breather following a record-setting rally, with concerns over the Federal Reserve's next move and a prolonged government shutdown weighing on sentiment. The pullback came as the U.S. government shutdown extended into its second week, creating uncertainty in the market. Investors were also closely watching for signals from the Federal Reserve regarding its monetary policy. This combination of factors led to a cautious mood on Wall Street, causing traders to pause and reassess their positions after weeks of significant gains. Adding to the unease, Chief Economist at Moody's Analytics, Mark Zandi, warned that 22 states are already showing clear signs of a recession, placing the broader U.S. economy in a precarious position.

Chegg is down 19.6% since the beginning of the year, and at $1.35 per share, it is trading 49.1% below its 52-week high of $2.65 from December 2024. Investors who bought $1,000 worth of Chegg’s shares 5 years ago would now be looking at an investment worth $16.29.

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