What Happened?
A number of stocks fell in the afternoon session after the April PPI report lifted the 10-year Treasury yield to a 10-month high of 4.49%, eliminating 2026 rate-cut expectations and raising the discount rate for long-duration growth valuations.
This ‘sticky’ inflation print also signaled that consumer real wages have turned negative (3.6% wages vs 3.8% CPI), which historically triggers a pullback in digital advertising budgets as brands protect margins.
Consumer internet companies like Google, Meta, Amazon, and Netflix, earn revenue from digital advertising and subscriptions. Their valuations are highly sensitive to Treasury yields, which set the bar for growth-stock multiples.
Two forces drove the reaction. First, the rate channel is direct: 10-month high yields mechanically reduce the present value of future earnings. Second, the demand channel: negative real wage growth signals that consumers are under pressure, and advertisers typically respond by tightening budgets. While the Q1 ad cycle was strong, the PPI suggested the macro environment was turning against the next quarter’s growth targets.
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:
Zooming In On Revolve (RVLV)
Revolve’s shares are very volatile and have had 28 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 7 days ago when the stock dropped 16.2% on the news that the company’s first-quarter results, while beating Wall Street expectations, failed to ease concerns about its long-term growth trajectory. Revolve reported strong headline numbers, with revenue growing 15.6% year-on-year to $342.9 million and earnings per share of $0.20, both surpassing analysts’ consensus estimates. The company also added 223,000 active customers.
However, the positive results were seemingly overshadowed by underlying worries. Despite the quarterly beat, the company has shown sluggish compounded annual sales growth of just 5% over the last three years. Furthermore, Wall Street’s forward-looking revenue growth estimates of 6.6% remain below the sector average. Investors likely interpreted the solid quarter as insufficient to alter the weaker long-term outlook, prompting a significant sell-off.
