What Happened?
A number of stocks jumped in the afternoon session after investors scooped up equities, shaking off the initial concerns inferred from the Fed's dot plot, with tech stocks leading the charge.
As a reminder, the Federal Reserve cut its benchmark interest rate by 25 basis points yesterday and signaled that more reductions could come before year-end and beyond. Initially when the cut was announced and Fed Chair Powell held his press conference, there was a pullback in the market as the Fed's "dot plot" revealed that only one cut was likely for 2026. This was below the three cuts that had been priced into the markets. This was the first interest rate cut of 2025, a move investors had widely anticipated. In response to the decision, stocks rose significantly, positioning major indexes like the S&P 500 and Nasdaq to open at record levels.
The Fed's decision was influenced by signs of a weakening labor market. Lower interest rates are generally seen as positive for stocks because they reduce borrowing costs for businesses and make fixed-income investments like bonds less attractive by comparison, driving capital into the equity market. While Fed Chair Powell noted the path forward has risks, the prospect of looser monetary policy has fueled optimism on Wall Street.
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:
- Data Analytics company Health Catalyst (NASDAQ:HCAT) jumped 6.1%. Is now the time to buy Health Catalyst? Access our full analysis report here, it’s free.
- Communications Platform company Twilio (NYSE:TWLO) jumped 4.4%. Is now the time to buy Twilio? Access our full analysis report here, it’s free.
- Data Analytics company Palantir Technologies (NASDAQ:PLTR) jumped 5.4%. Is now the time to buy Palantir Technologies? Access our full analysis report here, it’s free.
- Network Security company Zscaler (NASDAQ:ZS) jumped 4.1%. Is now the time to buy Zscaler? Access our full analysis report here, it’s free.
- Automation Software company Appian (NASDAQ:APPN) jumped 4.2%. Is now the time to buy Appian? Access our full analysis report here, it’s free.
Zooming In On Health Catalyst (HCAT)
Health Catalyst’s shares are extremely volatile and have had 46 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 8 days ago when the stock dropped 3.5% on the news that markets pulled back, reversing early gains, as investor sentiment remained cautious despite a softer-than-expected inflation reading.
Stocks rose in the morning session after an unexpected drop in the Producer Price Index (PPI) for August signaled easing inflation and raised expectations for a potential Federal Reserve interest rate cut. The U.S. Bureau of Labor Statistics reported that the PPI, which measures wholesale prices, edged down 0.1% last month, contrary to analyst expectations for a 0.3% rise. This data gives the Federal Reserve more flexibility to consider lowering interest rates to stimulate the economy.
Health Catalyst is down 59.9% since the beginning of the year, and at $2.94 per share, it is trading 67.4% below its 52-week high of $9.02 from December 2024. Investors who bought $1,000 worth of Health Catalyst’s shares 5 years ago would now be looking at an investment worth $81.62.
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