What Happened?
A number of stocks jumped in the morning 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 the previous day 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:
- Engineered Components and Systems company Graham Corporation (NYSE: GHM) jumped 3.3%. Is now the time to buy Graham Corporation? Access our full analysis report here, it’s free.
- Energy Products and Services company FTAI Infrastructure (NASDAQ: FIP) jumped 3.8%. Is now the time to buy FTAI Infrastructure? Access our full analysis report here, it’s free.
- Electronic Components company Advanced Energy (NASDAQ: AEIS) jumped 3.9%. Is now the time to buy Advanced Energy? Access our full analysis report here, it’s free.
- Construction and Maintenance Services company Limbach (NASDAQ: LMB) jumped 3%. Is now the time to buy Limbach? Access our full analysis report here, it’s free.
- Maintenance and Repair Distributors company VSE Corporation (NASDAQ: VSEC) jumped 2.9%. Is now the time to buy VSE Corporation? Access our full analysis report here, it’s free.
Zooming In On Advanced Energy (AEIS)
Advanced Energy’s shares are quite volatile and have had 15 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 16 days ago when the stock dropped 2.9% on the news that the major indices continued to retreat (Nasdaq -1.5%, S&P 500 -1.2%) amid profit-taking and renewed concerns about tariffs.
Investors reacted to a federal court ruling that most of President Trump's global tariffs were illegal, raising uncertainty over trade policy and the fiscal impact of potential refunds. Rising Treasury yields added to the pressure, with the 10-year climbing above 4.2% and the 30-year nearing 5%, intensifying worries about stretched equity valuations. September's historically weak track record for stocks further dampened sentiment, leaving traders cautious ahead of the jobs report later in the week and the Federal Reserve's upcoming rate decision.
Advanced Energy is up 45.8% since the beginning of the year, and at $168.20 per share, has set a new 52-week high. Investors who bought $1,000 worth of Advanced Energy’s shares 5 years ago would now be looking at an investment worth $2,840.
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