There’s something special about penny stocks. Even when the stock market is down, like it is today, you’re likely to find at least a handful exploding higher. Obviously, there’s plenty of risk that comes along with trading cheap stocks. But the reward can be just as formidable with gains in the triple and quadruple digits at times. Is that the norm?

No, but the likelihood of finding penny stocks to buy that are up 40%, 50%, or 100% on any given day has been relatively high as of late. Even though the general market trends don’t usually dramatically influence sentiment for cheap stocks, it doesn’t hurt to know what is driving broader directional moves in the major indexes.

Why The Stock Market Is Down Today

The stock market is down today based on several factors. One of the significant influences is the Federal Reserve’s monetary policy. The Federal Reserve is nearing the end of its tightening campaign. Some analysts suggest that the high inflation prints from last year will start to roll off. Furthermore, some have raised the possibility that the recent rate hike could be the last one, although most do not rule out the potential for another one.

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Another contributing factor is the performance of second-quarter earnings. The earnings season is nearly halfway through, and the current projections indicate a decline. Earnings are expected to fall 6.8% from a year ago, with revenues expected to be down 0.6%.

This is based on the blended growth rate and Refinitiv data. Roughly 78% of companies have topped expectations on the earnings front, and 62% have beaten revenue estimates. However, the overall decline in earnings and revenues has likely contributed to the market downturn.

Economic data also plays a role in market performance. The U.S. economy grew by 2.4% in the second quarter, beating expectations. However, this positive news was likely overshadowed by concerns about the Federal Reserve’s monetary policy and the overall decline in second-quarter earnings.

Finally, market volatility caused by earnings reports is causing big swings for many stocks on Wall Street today. For instance, shares of insurance company Willis Towers Watson fell 8% after reporting softer-than-expected earnings for the second quarter. This volatility contributes to the overall market downturn.

Penny Stocks To Watch

Akari Therapeutics (AKTX)

Shares of Akari Therapeutics continued to rise in the stock market today. The latest move for the penny stock began Tuesday after the company was granted EU Orphan Designation of Nomacopan in treating hematopoietic stem cell transplantation. While details were initially released by Europa. EU, Akari formally announced the milestone on Thursday.

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Akari develops its pipeline around autoimmune and inflammatory disease treatment candidates. The European Commission’s decision follows the positive opinion of the European Medicines Agency from last month. The company is in the midst of a registrational Phase 3 study of nomacopan in pediatric hematopoietic stem cell transplant-related thrombotic microangiopathy. Enrollment in the trial is now expected to begin next year.

Carmell Therapeutics (CTCX)

The SPAC combination of Alpha Healthcare Acquisition and Carmell Therapeutics was completed earlier this month. As with many SPAC stocks, the first move was lower and CTCX shares slipped from highs of $13.31 to lows of $2.38 within a matter of days.

Needless to say, sentiment has shifted at the end of this week. Carmell, a company developing regenerative medications including plasma-based biomaterials, currently has clearance for a phase 2 trial to study accelerated healing and reduced infections in shinbone fractures. It’s expected that a Phase 2 trial will begin for foot/ankle fusion, and pre-clinical development is also underway in spinal fusion settings, dental bone graft substitute, active soft tissue repair, alopecia, and cosmetic skin rejuvenation.

But it isn’t necessarily the company’s pipeline that has the market excited. News of a merger raised eyebrows on Thursday. Carmell and Axolotl Biologix, a regenerative medicine company, plan to merge. The deal will see Axolotl’s shareholder getting $65 million in equity value with $8 million of it in cash. There’s also up to $75 million in milestone equity on the table.

Josh Sandberg, who’ll serve as the incoming Executive Chairman of Carmell, said, “I am excited to partner with Rajiv and Carmell to build on our shared vision of offering industry-leading products that positively impact patients’ lives. Our teams have worked very diligently, and this transaction creates unlimited possibilities.”

Homology Medicines (FIXX)

One of the more active penny stocks under $1 during Thursday’s postmarket session was Homology Medicines. The company specializes in genetic therapy development. While things have been relatively quiet on the headline front. Its last update from May gave investors something to pay attention to.

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Homology reported the first data from its IND-enabling studies with its HMI-104. It showed “sustained expression of functional C5mAB levels” bringing optimism to management. “Given the severity of PNH, which is a rare, acquired blood disorder, and the unmet need associated with chronically administered available therapies, HMI-104 could provide an important new one-time approach,” said Albert Seymour, Ph.D., President and CEO of Homology Medicines.

Fast-forward to this month and the market has reacted favorably to another milestone from Homology. The company announced positive initial data from its first dose level in a pheEDIT trial. It is evaluating its gene editing candidate HMI-103 in classical phenylketonuria (PKU).

Albert Seymour, Ph.D., President and CEO of Homology Medicines, explained, “We believe these initial clinical data from the first cohort suggest that our one-time gene editing approach has the potential to restore the normal biochemical pathway and support our recommendation to dose-escalate to identify an optimal dose.”

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