What Happened?
A number of stocks jumped in the afternoon session after a key inflation data 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:
- Defense Contractors company Leonardo DRS (NASDAQ: DRS) jumped 3.4%. Is now the time to buy Leonardo DRS? Access our full analysis report here, it’s free.
- Defense Contractors company Mercury Systems (NASDAQ: MRCY) jumped 5%. Is now the time to buy Mercury Systems? Access our full analysis report here, it’s free.
- Industrial Packaging company Sealed Air (NYSE: SEE) jumped 4.1%. Is now the time to buy Sealed Air? Access our full analysis report here, it’s free.
- Construction and Maintenance Services company MYR Group (NASDAQ: MYRG) jumped 3%. Is now the time to buy MYR Group? Access our full analysis report here, it’s free.
- Automobile Manufacturing company Winnebago (NYSE: WGO) jumped 3.1%. Is now the time to buy Winnebago? Access our full analysis report here, it’s free.
Zooming In On Mercury Systems (MRCY)
Mercury Systems’s shares are not very volatile and have only had 9 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 8 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.
Mercury Systems is up 81.4% since the beginning of the year, and at $76.79 per share, it is trading close to its 52-week high of $77.10 from September 2025. Investors who bought $1,000 worth of Mercury Systems’s shares 5 years ago would now be looking at an investment worth $976.78.
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