What Happened?
A number of stocks jumped in the afternoon 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 yesterday 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:
- Renewable Energy company Shoals (NASDAQ: SHLS) jumped 3.3%. Is now the time to buy Shoals? Access our full analysis report here, it’s free.
- Professional Tools and Equipment company Kennametal (NYSE: KMT) jumped 3.5%. Is now the time to buy Kennametal? Access our full analysis report here, it’s free.
- Commercial Building Products company Janus (NYSE: JBI) jumped 3.1%. Is now the time to buy Janus? Access our full analysis report here, it’s free.
- Gas and Liquid Handling company SPX Technologies (NYSE: SPXC) jumped 3.4%. Is now the time to buy SPX Technologies? Access our full analysis report here, it’s free.
- Engineered Components and Systems company Regal Rexnord (NYSE: RRX) jumped 3.4%. Is now the time to buy Regal Rexnord? Access our full analysis report here, it’s free.
Zooming In On Kennametal (KMT)
Kennametal’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 biggest move we wrote about over the last year was 11 months ago when the stock gained 19.4% on the news that the company reported strong third-quarter earnings. Kennametal provided a full-year EPS forecast, which blew past analysts' expectations. EPS also outperformed Wall Street's estimates during the quarter.
On the other hand, its EPS forecast for next quarter missed and its revenue fell short of Wall Street's estimates. Overall, this quarter was mixed but the strong full year EPS guidance seems to be lifting shares.
Kennametal is down 10.3% since the beginning of the year, and at $21.28 per share, it is trading 31.9% below its 52-week high of $31.23 from November 2024. Investors who bought $1,000 worth of Kennametal’s shares 5 years ago would now be looking at an investment worth $646.81.
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