What Happened?

A number of stocks jumped in the afternoon session after markets rotated into defensive names to position themselves for a massive injection of government spending. 

The sector was ignited by President Trump's call for a $1.5 trillion defense budget for 2027, a significant increase that sent defense contractors surging. Northrop Grumman jumped over 10% and Lockheed Martin gained nearly 8%, acting as the primary engine for the sector's outperformance. Beyond the immediate defense rally, the industrial sector benefited from a broader stabilization in energy costs, with crude prices rebounding. This combination of policy-driven demand and stabilizing input costs made heavy industry an attractive destination.

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:

• General Industrial Machinery company Albany (NYSE: AIN) jumped 5.3%. Is now the time to buy Albany? Access our full analysis report here, it’s free.
• General Industrial Machinery company L.B. Foster (NASDAQ: FSTR) jumped 3.3%. Is now the time to buy L.B. Foster? Access our full analysis report here, it’s free.
• General Industrial Machinery company Kadant (NYSE: KAI) jumped 5.7%. Is now the time to buy Kadant? Access our full analysis report here, it’s free.
• General Industrial Machinery company Illinois Tool Works (NYSE: ITW) jumped 3%. Is now the time to buy Illinois Tool Works? Access our full analysis report here, it’s free.
• General Industrial Machinery company Columbus McKinnon (NASDAQ: CMCO) jumped 3.4%. Is now the time to buy Columbus McKinnon? Access our full analysis report here, it’s free.

Zooming In On Kadant (KAI)

Kadant’s shares are somewhat volatile and have had 11 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 29 days ago when the stock gained 4.7% on the news that the Federal Reserve lowered its benchmark interest rate by a quarter-percentage point, signaling a more accommodative monetary policy. 

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.

Kadant is up 8.6% since the beginning of the year, but at $310.93 per share, it is still trading 22% below its 52-week high of $398.39 from February 2025. Investors who bought $1,000 worth of Kadant’s shares 5 years ago would now be looking at an investment worth $2,098.

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