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:
- Surgical Equipment & Consumables - Diversified company CONMED (NYSE: CNMD) jumped 5.7%. Is now the time to buy CONMED? Access our full analysis report here, it’s free for active Edge members.
- Outpatient & Specialty Care company Select Medical (NYSE: SEM) jumped 6.2%. Is now the time to buy Select Medical? Access our full analysis report here, it’s free for active Edge members.
- Senior Health, Home Health & Hospice company BrightSpring Health Services (NASDAQ: BTSG) jumped 5.7%. Is now the time to buy BrightSpring Health Services? Access our full analysis report here, it’s free for active Edge members.
- Healthcare Technology for Providers company Privia Health (NASDAQ: PRVA) jumped 5.5%. Is now the time to buy Privia Health? Access our full analysis report here, it’s free for active Edge members.
- Testing & Diagnostics Services company RadNet (NASDAQ: RDNT) jumped 5.8%. Is now the time to buy RadNet? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Select Medical (SEM)
Select Medical’s shares are not very volatile and have only had 8 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 21 days ago when the stock dropped 5.6% on the news that the company reported third-quarter results that, while beating market expectations, showed a significant decline in sales and profit compared to the previous year. Although the healthcare services company's revenue of $1.36 billion and earnings per share of $0.23 surpassed analyst estimates, the figures told a different story when compared to the same period in the prior year. Sales fell by 22.6% from a year ago, when the company posted revenues of $1.76 billion. Similarly, profit per share dropped from $0.43 in the same quarter last year. The company's operating profit margin also tightened, falling by 2.7 percentage points, which showed it was less efficient with its spending relative to its revenue. These steep year-over-year drops in key financial metrics appeared to outweigh the positive news of beating analyst forecasts.
Select Medical is down 28.4% since the beginning of the year, and at $13.46 per share, it is trading 66.1% below its 52-week high of $39.67 from November 2024. Investors who bought $1,000 worth of Select Medical’s shares 5 years ago would now be looking at an investment worth $539.70.
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