What Happened?
A number of stocks fell in the afternoon session after Federal Reserve Chair Jerome Powell delivered cautious remarks on the economy, spooking investors and pulling indexes back from record highs.
Speaking for the first time since the central bank's recent interest rate cut, Powell described the current economic landscape as a "challenging situation." He highlighted the difficult task of balancing a weakening labor market against persistent inflation risks.
Powell also commented that equity prices appeared "fairly highly valued," adding to investor concerns and prompting profit-taking. The cautious tone from the Fed chair drove declines across major indexes, including the S&P 500 and the tech-heavy Nasdaq, as the market reassessed the path forward for monetary policy.
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:
- Vulnerability Management company Rapid7 (NASDAQ: RPD) fell 4.9%. Is now the time to buy Rapid7? Access our full analysis report here, it’s free.
- Data Infrastructure company Elastic (NYSE: ESTC) fell 3.5%. Is now the time to buy Elastic? Access our full analysis report here, it’s free.
- Data Infrastructure company C3.ai (NYSE: AI) fell 2.9%. Is now the time to buy C3.ai? Access our full analysis report here, it’s free.
- E-commerce Software company Wix (NASDAQ: WIX) fell 4.1%. Is now the time to buy Wix? Access our full analysis report here, it’s free.
- Automation Software company UiPath (NYSE: PATH) fell 3.8%. Is now the time to buy UiPath? Access our full analysis report here, it’s free.
Zooming In On Rapid7 (RPD)
Rapid7’s shares are somewhat volatile and have had 14 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 5 days ago when the stock gained 4.2% on the news that 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.
Rapid7 is down 49.9% since the beginning of the year, and at $19.73 per share, it is trading 55.1% below its 52-week high of $43.94 from December 2024. Investors who bought $1,000 worth of Rapid7’s shares 5 years ago would now be looking at an investment worth $330.49.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
