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. New York Federal Reserve President John Williams stated he sees “room for a further adjustment” in the near term, sparking a significant market rally. Following his remarks, the probability of the central bank cutting rates at its December meeting jumped from 39% to over 73%, according to the CME FedWatch tool. This positive sentiment provided relief to markets amid concerns over high valuations, particularly in AI-related stocks.

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:

• Specialized Medical & Nursing Services company The Ensign Group (NASDAQ: ENSG) jumped 3.1%. Is now the time to buy The Ensign Group? Access our full analysis report here, it’s free for active Edge members.
• Genomics & Sequencing company Illumina (NASDAQ: ILMN) jumped 3.3%. Is now the time to buy Illumina? Access our full analysis report here, it’s free for active Edge members.
• Generic Pharmaceuticals company Amphastar Pharmaceuticals (NASDAQ: AMPH) jumped 3.2%. Is now the time to buy Amphastar Pharmaceuticals? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Illumina (ILMN)

Illumina’s shares are very volatile and have had 20 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 3.4% on the news that its negative momentum continued as Barclays maintained its Underweight recommendation on the stock. The rating, which was reiterated, signaled continued caution from the investment bank. An 'Underweight' recommendation suggests that an analyst believes the stock might perform worse than other stocks in its industry. This continued negative view from a major bank likely weighed on investor sentiment. The action came amid broader concerns regarding the company's performance, including slowing earnings growth and retreating profit margins.

Illumina is down 5.4% since the beginning of the year, and at $123.93 per share, it is trading 16.6% below its 52-week high of $148.53 from December 2024. Investors who bought $1,000 worth of Illumina’s shares 5 years ago would now be looking at an investment worth $410.55.

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