What Happened?
A number of stocks fell in the afternoon session after an unexpectedly sharp rise in wholesale inflation fueled concerns about rising costs and their impact on corporate profits. The primary catalyst was the July 2025 Producer Price Index (PPI), a measure of inflation at the wholesale level, which jumped 0.9% against forecasts of a 0.2% rise. This represents the most significant monthly increase in over three years, pointing to mounting cost pressures for manufacturers, with tariffs cited as a key factor. This data complicates the Federal Reserve's upcoming interest rate decisions, as persistent inflation may prevent rate cuts, creating a headwind for cyclical sectors like Industrials.
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:
- Construction and Maintenance Services company Orion (NYSE: ORN) fell 3.1%. Is now the time to buy Orion? Access our full analysis report here, it’s free.
- Defense Contractors company Mercury Systems (NASDAQ: MRCY) fell 3.4%. Is now the time to buy Mercury Systems? Access our full analysis report here, it’s free.
- Engineered Components and Systems company Gates Industrial Corporation (NYSE: GTES) fell 3.4%. Is now the time to buy Gates Industrial Corporation? Access our full analysis report here, it’s free.
- General Industrial Machinery company John Bean (NYSE: JBTM) fell 3.3%. Is now the time to buy John Bean? Access our full analysis report here, it’s free.
- Engineering and Design Services company Sterling (NASDAQ: STRL) fell 3.1%. Is now the time to buy Sterling? Access our full analysis report here, it’s free.
Zooming In On Mercury Systems (MRCY)
Mercury Systems’s shares are not very volatile and have only had 9 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 2 days ago when the stock gained 24.9% on the news that the company reported second-quarter 2025 results that significantly beat Wall Street's expectations for both revenue and profitability. The aerospace and defense firm announced revenue of $273.1 million, a 9.9% year-on-year increase that surpassed analyst estimates of $244.2 million. The company's bottom line was even more impressive, with adjusted earnings per share of $0.47, more than double the consensus forecast of $0.22. This strong performance was also reflected in its operational efficiency, as its operating margin improved to 8.6% from a negative 3.2% in the same period last year. Additionally, Mercury Systems reported a healthy backlog of $1.4 billion, indicating a solid pipeline of future business.
Mercury Systems is up 60.3% since the beginning of the year, and at $67.83 per share, it is trading close to its 52-week high of $68.39 from August 2025. Investors who bought $1,000 worth of Mercury Systems’s shares 5 years ago would now be looking at an investment worth $849.04.
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