What Happened?
A number of stocks jumped in the morning 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 the previous day 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:
- Engineering and Design Services company AECOM (NYSE: ACM) jumped 3.8%. Is now the time to buy AECOM? Access our full analysis report here, it’s free.
- General Industrial Machinery company Columbus McKinnon (NASDAQ: CMCO) jumped 2.6%. Is now the time to buy Columbus McKinnon? Access our full analysis report here, it’s free.
- Ground Transportation company Universal Logistics (NASDAQ: ULH) jumped 4%. Is now the time to buy Universal Logistics? Access our full analysis report here, it’s free.
- Aerospace company Astronics (NASDAQ: ATRO) jumped 3.5%. Is now the time to buy Astronics? Access our full analysis report here, it’s free.
- Construction and Maintenance Services company Matrix Service (NASDAQ: MTRX) jumped 3.5%. Is now the time to buy Matrix Service? Access our full analysis report here, it’s free.
Zooming In On Universal Logistics (ULH)
Universal Logistics’s shares are very volatile and have had 22 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 27 days ago when the stock gained 13.6% 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.
Universal Logistics is down 43.7% since the beginning of the year, and at $24.64 per share, it is trading 52.9% below its 52-week high of $52.28 from November 2024. Investors who bought $1,000 worth of Universal Logistics’s shares 5 years ago would now be looking at an investment worth $1,160.
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