What Happened?

A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official bolstered hopes for an interest rate cut. 

The positive sentiment followed comments from New York Federal Reserve President John Williams, a voting member of the rate-setting Federal Open Market Committee (FOMC), who indicated he sees room for further policy easing. Following his remarks, the probability of a December rate cut surged from 39% to 71%, according to the CME FedWatch Tool, causing Treasury yields to fall. Lower interest rates can be particularly beneficial for growth-oriented sectors like software, as they increase the present value of future earnings. This renewed hope provided a boost to the sector, which had recently faced pressure from concerns over high valuations in artificial intelligence.

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:

• HR Software company Paylocity (NASDAQ: PCTY) jumped 3.3%. Is now the time to buy Paylocity? Access our full analysis report here, it’s free for active Edge members.
• Banking Software company Q2 Holdings (NYSE: QTWO) jumped 3.2%. Is now the time to buy Q2 Holdings? Access our full analysis report here, it’s free for active Edge members.
• Finance and Accounting Software company BILL (NYSE: BILL) jumped 3.1%. Is now the time to buy BILL? Access our full analysis report here, it’s free for active Edge members.
• Compliance Software company Workiva (NYSE: WK) jumped 3.1%. Is now the time to buy Workiva? Access our full analysis report here, it’s free for active Edge members.
• Document Management company DocuSign (NASDAQ: DOCU) jumped 3%. Is now the time to buy DocuSign? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Paylocity (PCTY)

Paylocity’s shares are not very volatile and have only had 4 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 15 days ago when the stock dropped 5.7% on the news that it reported first-quarter fiscal 2026 results that showed a significant miss on earnings per share. Although the company's revenue increased by 12% year-over-year to $408 million, its earnings per share of $0.86 fell drastically short of the $1.57 that was forecast. This represented a miss of over 45%, signaling a sharp decline in profitability to investors. The disappointing results prompted a negative reaction from the analyst community. For instance, Citizens lowered its price target on the shares from $270.00 to $245.00, a decrease of more than 9%, reflecting concerns about the company's performance.

Paylocity is down 23.6% since the beginning of the year, and at $148.99 per share, it is trading 31.6% below its 52-week high of $217.86 from February 2025. Investors who bought $1,000 worth of Paylocity’s shares 5 years ago would now be looking at an investment worth $763.46.

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