Krispy Kreme (DNUT 2.91%) stock is sinking in Tuesday's trading. The company's share price was down 8.8% as of 2 p.m. ET, and the S&P 500 (^GSPC 0.27%) and the Nasdaq Composite (^IXIC 0.49%) were down 0.3% and 0.2%, respectively, at the same point in the session. Krispy Kreme stock had been down as much as 10% earlier today.
There isn't any business-specific news driving Krispy Kreme's valuation lower today, but the pullback comes on the heels of big valuation gains that were also disconnected from the company's fundamentals and outlook. Krispy Kreme gained attention as a meme stock trade earlier this month, but that momentum has been fading in recent trading.
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Krispy Kreme sinks as meme stock trade loses momentum
Krispy Kreme's valuation is quickly heading lower today as investors are now betting that the Federal Reserve will not cut interest rates this week. Investors are still broadly betting that the central banking authority will cut rates multiple times this year, but early reports and coverage now suggest that the Fed will keep rates at their current levels with its meeting this week. Krispy Kreme and a handful of other new meme stocks had seen big gains recently, and the possibility of a rate cut this month was a key driver in their valuation gains.
What's next for Krispy Kreme?
Despite a big pullback in recent trading sessions, Krispy Kreme stock is still up roughly 41.5% over the last month -- with most of its gains driven by meme stock-related trading. If the Fed announces that it's not cutting interest rates this week, the company's share price could see more big pullbacks. While it's possible that Krispy Kreme will see a resurgence of meme-stock momentum, the stock looks too risky to be a good buy for most investors right now.
