What Happened?
A number of stocks jumped in the afternoon session after key inflation data (PCE) aligned with forecasts, bolstering hopes for continued interest rate cuts from the Federal Reserve.
The Personal Consumption Expenditures (PCE) price index, the central bank's preferred gauge of inflation, showed a slight year-over-year increase in August but did not surprise economists. This report was met with relief on Wall Street, as it suggests inflationary pressures remain contained, giving the Federal Reserve more leeway to continue its monetary easing policy. Investors interpreted the news as a positive sign that the Fed can support the economy without risking runaway inflation. The positive sentiment helped the major indices claw back some of the losses from a recent three-day slide, with stocks rising across various sectors.
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:
- Casino Operator company Caesars Entertainment (NASDAQ: CZR) jumped 4.1%. Is now the time to buy Caesars Entertainment? Access our full analysis report here, it’s free.
- Media company fuboTV (NYSE: FUBO) jumped 2.7%. Is now the time to buy fuboTV? Access our full analysis report here, it’s free.
- Casino Operator company Bally's (NYSE: BALY) jumped 3.5%. Is now the time to buy Bally's? Access our full analysis report here, it’s free.
- Casino Operator company Red Rock Resorts (NASDAQ: RRR) jumped 2.9%. Is now the time to buy Red Rock Resorts? Access our full analysis report here, it’s free.
- Media company Scholastic (NASDAQ: SCHL) jumped 3.1%. Is now the time to buy Scholastic? Access our full analysis report here, it’s free.
Zooming In On Caesars Entertainment (CZR)
Caesars Entertainment’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 18 days ago when the stock dropped 1.5% on the news that S&P Dow Jones Indices announced that the casino operator will be removed from the S&P 500 index.
The removal, part of a quarterly rebalancing, is scheduled to take effect before the start of trading on September 22. Caesars' market capitalization has declined below the minimum threshold required for inclusion in the large-cap index.
When a company is removed from a major index like the S&P 500, tracker funds and ETFs are forced to sell their holdings, which creates significant selling pressure on the stock. According to the announcement, Caesars Entertainment will be moved to the S&P SmallCap 600 Index. The company will be replaced in the S&P 500 by online brokerage Robinhood Markets (HOOD).
Caesars Entertainment is down 17% since the beginning of the year, and at $27.04 per share, it is trading 40.6% below its 52-week high of $45.55 from October 2024. Investors who bought $1,000 worth of Caesars Entertainment’s shares 5 years ago would now be looking at an investment worth $464.51.
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