What happened?

A number of stocks jumped in the afternoon session after Reuters reported that China has prolonged its export control relief on rare earth materials until January 10, 2027, maintaining supply access for overseas manufacturers while extending suspensions on additional tariffs and port fees. 

Rare earth elements comprise a group of seventeen specialized metals vital for building high-power magnets, electric vehicle motors, wind turbines, and defense electronics. Because China processes the vast majority of the world's rare earth supplies, export controls could disrupt assembly lines across the United States, Japan, India, and Europe. Prolonging the policy relief through January 2027 allays immediate fears of severe supply chain bottlenecks for automotive and clean energy producers. 

In addition to export access, the authorities extended pauses on supplemental tariffs and commercial port fees, reducing logistical overhead. Market participants viewed the move as an essential lifeline for global manufacturing networks, allowing industrial firms to secure necessary component shipments without near-term operational disruptions.

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 machinery company Terex (NYSE: TEX) jumped 6.5%. Is now the time to buy Terex? Access our full analysis report here, it’s free.
• Agricultural machinery company Titan International (NYSE: TWI) jumped 6.9%. Is now the time to buy Titan International? Access our full analysis report here, it’s free.
• Construction machinery company Caterpillar (NYSE: CAT) jumped 6.7%. Is now the time to buy Caterpillar? Access our full analysis report here, it’s free.
• Agricultural machinery company AGCO (NYSE: AGCO) jumped 5.3%. Is now the time to buy AGCO? Access our full analysis report here, it’s free.
• Defense contractors company AeroVironment (NASDAQ: AVAV) jumped 10.5%. Is now the time to buy AeroVironment? Access our full analysis report here, it’s free.

Zooming in on AeroVironment (AVAV)

AeroVironment’s shares are extremely volatile and have had 64 moves greater than 5% over the last year. But moves this big are rare even for AeroVironment and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was 4 months ago when the stock gained 23% on the news that it reported first-quarter 2026 results that crushed analyst estimates. The takeaway from the print was that demand is outrunning supply across drones, counter-drone systems and laser weapons as the order book (bookings $2.7B, book-to-bill 1.4) grew faster than revenue, and funded backlog jumped ~65% to $1.2 billion from $726.6 million a year ago. Adding to the positive updates, revenue of $641.6 million (up 133% year-over-year) topped the ~$558 million consensus by roughly 15%, and adjusted EPS of $1.84 beat the ~$1.47 estimate by about 24%. 

Crucially, this wasn't all acquisition math. BlueHalo and Empirical Systems contributed $282.3 million (44%) of Q4 revenue, but organic growth was still 31%. CEO Wahid Nawabi said the year left AV "a stronger, more resilient, and diversified company," pointing to counter-UAS Titan orders that more than doubled and a LOCUST laser that shot down drones with a 100% success rate at sea aboard the USS George H.W. Bush. However, the outlook was mixed, as the company's full-year revenue and profit guidance for the upcoming year fell slightly short of Wall Street's consensus. Notably, FY2027 adjusted-EPS guidance of $3.02–$3.34 was well below the ~$3.85–$4.00 consensus, yet the stock soared. Investors looked through it because the shortfall was self-inflicted. Depreciation and cloud amortization were expected to rise ~$37 million (77%) as AV pours capital into new Switchblade, missile and laser capacity ahead of orders, not because demand is fading.

AeroVironment is down 51% since the beginning of the year, and at $125.66 per share, it is trading 68% below its 52-week high of $392.86 from January 2026. Despite the year-to-date decline, investors who bought $1,000 worth of AeroVironment’s shares 5 years ago would now be looking at an investment worth $1,344.

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