What Happened?

A number of stocks jumped in the afternoon session after the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium. Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.

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:

• Vertical Software company Alarm.com (NASDAQ: ALRM) jumped 3.6%. Is now the time to buy Alarm.com? Access our full analysis report here, it’s free.
• Electronics & Gaming Retailer company Best Buy (NYSE: BBY) jumped 4.2%. Is now the time to buy Best Buy? Access our full analysis report here, it’s free.
• Toys and Electronics company Mattel (NASDAQ: MAT) jumped 3.1%. Is now the time to buy Mattel? Access our full analysis report here, it’s free.
• Engineered Components and Systems company RBC Bearings (NYSE: RBC) jumped 3.1%. Is now the time to buy RBC Bearings? Access our full analysis report here, it’s free.
• Inspection Instruments company Badger Meter (NYSE: BMI) jumped 3.9%. Is now the time to buy Badger Meter? Access our full analysis report here, it’s free.

Zooming In On Best Buy (BBY)

Best Buy’s shares are somewhat volatile and have had 10 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 9 days ago when the stock gained 3.1% on the news that markets continued to rally amid growing investor optimism for a Federal Reserve interest rate cut in September. This optimism was spurred by a recent Consumer Price Index (CPI) report that did not show runaway inflation, increasing the perceived probability of a rate cut to over 90%. Lower interest rates are generally seen as a positive for the economy as they reduce borrowing costs for consumers, which can stimulate spending on non-essential goods. Consequently, investors bid up shares in the apparel, home furnishings, and automotive retail industries in anticipation of stronger consumer demand.

Best Buy is down 12.5% since the beginning of the year, and at $75.44 per share, it is trading 27% below its 52-week high of $103.30 from September 2024. Investors who bought $1,000 worth of Best Buy’s shares 5 years ago would now be looking at an investment worth $642.71.

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