What Happened?

A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official hinted at a potential interest rate cut in December. John Williams, president of the Federal Reserve Bank of New York, signaled he was open to lowering the fed funds rate—the key interest rate that banks charge each other for overnight loans—to support the job market. Speaking at an event, Williams stated that he sees “room for a further adjustment” for interest rates, which immediately shifted market expectations. Following his remarks, the perceived likelihood of an interest rate cut at the Federal Reserve's December meeting flipped from unlikely to more likely than not. The prospect of lower borrowing costs sent a wave of optimism through the markets, leading to a rally in major indices like the S&P 500, Dow Jones Industrial Average, and the Nasdaq Composite.

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:

• Traditional Media & Publishing company EchoStar (NASDAQ: SATS) jumped 2.6%. Is now the time to buy EchoStar? Access our full analysis report here, it’s free for active Edge members.
• Terrestrial Telecommunication Services company Lumen (NYSE: LUMN) jumped 2.7%. Is now the time to buy Lumen? Access our full analysis report here, it’s free for active Edge members.
• Business Process Outsourcing & Consulting company Exponent (NASDAQ: EXPO) jumped 3%. Is now the time to buy Exponent? Access our full analysis report here, it’s free for active Edge members.
• IT Distribution & Solutions company TD SYNNEX (NYSE: SNX) jumped 2.9%. Is now the time to buy TD SYNNEX? Access our full analysis report here, it’s free for active Edge members.
• IT Services & Consulting company IBM (NYSE: IBM) jumped 2.8%. Is now the time to buy IBM? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Exponent (EXPO)

Exponent’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 4 months ago when the stock dropped 4% on the news that a surprisingly weak U.S. jobs report was released, fueling concerns about a slowing economy. The U.S. economy added only 73,000 jobs, falling significantly short of economists' expectations, while figures for May and June were revised down, erasing 258,000 previously reported jobs. The professional and business services industry itself shed 14,000 jobs. This data points to a cooling labor market, fueling concerns of a slowing economy. A weaker economic outlook often leads to reduced corporate spending on key services like IT consulting and professional staffing, which directly impacts the sector's revenue and growth prospects. The report immediately increased investor expectations of an interest rate cut by the Federal Reserve.

Exponent is down 19.6% since the beginning of the year, and at $70.66 per share, it is trading 29.6% below its 52-week high of $100.30 from November 2024. Investors who bought $1,000 worth of Exponent’s shares 5 years ago would now be looking at an investment worth $862.70.

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