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:

• Virtual Events Software company ON24 (NYSE: ONTF) jumped 3.1%. Is now the time to buy ON24? Access our full analysis report here, it’s free.
• Data Storage company Commvault (NASDAQ: CVLT) jumped 3%. Is now the time to buy Commvault? Access our full analysis report here, it’s free.
• Marketing Software company Upland Software (NASDAQ: UPLD) jumped 4.1%. Is now the time to buy Upland Software? Access our full analysis report here, it’s free.
• Data Analytics company Samsara (NYSE: IOT) jumped 2.7%. Is now the time to buy Samsara? Access our full analysis report here, it’s free.
• Data Analytics company MicroStrategy (NASDAQ: MSTR) jumped 7.3%. Is now the time to buy MicroStrategy? Access our full analysis report here, it’s free.

Zooming In On MicroStrategy (MSTR)

MicroStrategy’s shares are extremely volatile and have had 73 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 24 days ago when the stock dropped 3.3% on the news that the price of Bitcoin fell and an analyst reiterated a 'Sell' rating citing risks in the company's funding strategy. 

The decline was driven by a drop in the price of Bitcoin and a critical analyst report. Monness analyst Gus Gala reiterated a 'Sell' rating on the stock with a price target implying roughly 50% downside. Gala's concerns center on the company's strategy of issuing new shares to fund its Bitcoin purchases, which dilutes existing shareholders. Compounding the pressure, Bitcoin's price fell from around $117,000 late Friday to below $112,000, its lowest level since early July, dragging down other crypto-linked stocks as well.

MicroStrategy is up 16.8% since the beginning of the year, but at $350.35 per share, it is still trading 26.1% below its 52-week high of $473.83 from November 2024. Investors who bought $1,000 worth of MicroStrategy’s shares 5 years ago would now be looking at an investment worth $21,953.

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