What Happened?
A number of stocks jumped in the afternoon session after a key inflation data aligned with market expectations, sparking optimism for potential interest rate cuts.
The August Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve's preferred inflation gauge, came in as forecast, easing concerns about the central bank needing to maintain high interest rates for longer. As a result, investor hopes for future rate cuts have been bolstered.
Lower interest rates are typically beneficial for growth sectors like technology because they increase the valuation of future earnings. This positive sentiment was widespread, contributing to gains across major indexes, including the Dow Jones Industrial Average, S&P 500, and the tech-heavy Nasdaq.
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:
- Data Infrastructure company Confluent (NASDAQ: CFLT) jumped 2.7%. Is now the time to buy Confluent? Access our full analysis report here, it’s free.
- Payments Software company Flywire (NASDAQ: FLYW) jumped 2.6%. Is now the time to buy Flywire? Access our full analysis report here, it’s free.
- Vertical Software company Alarm.com (NASDAQ: ALRM) jumped 2.9%. Is now the time to buy Alarm.com? Access our full analysis report here, it’s free.
- Network Security company Zscaler (NASDAQ: ZS) jumped 3.1%. Is now the time to buy Zscaler? Access our full analysis report here, it’s free.
Zooming In On Zscaler (ZS)
Zscaler’s shares are somewhat volatile and have had 12 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 8 days ago when the stock gained 4.1% on the news that 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.
Zscaler is up 62.7% since the beginning of the year, and at $295.56 per share, it is trading close to its 52-week high of $316.50 from July 2025. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at an investment worth $2,135.
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