What Happened?
Shares of behavioral health company Acadia Healthcare (NASDAQ: ACHC) fell 3% in the afternoon session after it was announced the company will be removed from the S&P MidCap 400 index. The change, announced by S&P Dow Jones Indices as part of its quarterly rebalancing, will be effective before the market opens on September 22. Nutanix is set to replace Acadia Healthcare in the index. Removal from a major index is typically viewed negatively by investors because it triggers forced selling from index funds that track the S&P MidCap 400. These funds must sell their holdings in the departing company to align their portfolios with the index's new composition, creating downward pressure on the stock price.
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What Is The Market Telling Us
Acadia Healthcare’s shares are quite volatile and have had 19 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 17 days ago when the stock gained 4.5% 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.
Acadia Healthcare is down 43.4% since the beginning of the year, and at $23.09 per share, it is trading 70.9% below its 52-week high of $79.34 from September 2024. Investors who bought $1,000 worth of Acadia Healthcare’s shares 5 years ago would now be looking at an investment worth $807.46.
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