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:
- Student Loan company Sallie Mae (NASDAQ: SLM) jumped 3.5%. Is now the time to buy Sallie Mae? Access our full analysis report here, it’s free.
- Thrifts & Mortgage Finance company Two Harbors Investment (NYSE: TWO) jumped 3.1%. Is now the time to buy Two Harbors Investment? Access our full analysis report here, it’s free.
- Gas and Liquid Handling company Flowserve (NYSE: FLS) jumped 3.1%. Is now the time to buy Flowserve? Access our full analysis report here, it’s free.
- Patient Monitoring company Masimo (NASDAQ: MASI) jumped 3.1%. Is now the time to buy Masimo? Access our full analysis report here, it’s free.
- Outpatient & Specialty Care company Select Medical (NYSE: SEM) jumped 3.5%. Is now the time to buy Select Medical? Access our full analysis report here, it’s free.
Zooming In On Select Medical (SEM)
Select Medical’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 9 days ago when the stock gained 3.5% on the news that markets continued to rally amid growing speculation of an impending interest rate cut by the Federal Reserve. Following a favorable Consumer Price Index (CPI) report, investors are increasingly betting on a rate reduction next month, a sentiment amplified by U.S. Treasury Secretary Scott Bessent's call for a significant cut. This has fueled a 'risk-on' environment across Wall Street. Lower interest rates are typically beneficial for growth-oriented sectors like healthcare, as they reduce the cost of borrowing for research and innovation and increase the present value of future earnings.
Select Medical is down 28.5% since the beginning of the year, and at $13.44 per share, it is trading 66.6% below its 52-week high of $40.20 from November 2024. Investors who bought $1,000 worth of Select Medical’s shares 5 years ago would now be looking at an investment worth $687.12.
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