What Happened?

A number of stocks jumped in the afternoon session after the Consumer Price Index (CPI) report bolstered expectations for a Federal Reserve interest rate cut despite showing persistent inflation. 

The August CPI data, a key measure of inflation, showed prices rose 2.9% annually, in line with expectations. While inflation remains above the Federal Reserve's 2% target, investors were focusing on other signs of a cooling economy, particularly a weakening labor market. As a result, the market widely anticipated that the Fed would cut interest rates at its September meeting to support the economy. Investors priced in multiple rate cuts by year-end, which boosted market sentiment and sent Treasury yields lower.

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:

• IT Services & Consulting company EPAM (NYSE: EPAM) jumped 2.9%. Is now the time to buy EPAM? Access our full analysis report here, it’s free.
• Professional Staffing & HR Solutions company Alight (NYSE: ALIT) jumped 4.5%. Is now the time to buy Alight? Access our full analysis report here, it’s free.
• IT Distribution & Solutions company Insight Enterprises (NASDAQ: NSIT) jumped 2.2%. Is now the time to buy Insight Enterprises? Access our full analysis report here, it’s free.
• IT Distribution & Solutions company ScanSource (NASDAQ: SCSC) jumped 4.5%. Is now the time to buy ScanSource? Access our full analysis report here, it’s free.
• Specialized Technology company Zebra (NASDAQ: ZBRA) jumped 2.9%. Is now the time to buy Zebra? Access our full analysis report here, it’s free.

Zooming In On ScanSource (SCSC)

ScanSource’s shares are not very volatile and have only had 7 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 previous big move we wrote about was 20 days ago when the stock gained 12.6% on the news that 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.

ScanSource is down 3.5% since the beginning of the year, and at $45.40 per share, it is trading 14.5% below its 52-week high of $53.11 from December 2024. Investors who bought $1,000 worth of ScanSource’s shares 5 years ago would now be looking at an investment worth $2,436.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.