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.
The positive sentiment followed comments from New York Federal Reserve President John Williams, a voting member of the rate-setting Federal Open Market Committee (FOMC), who indicated he sees room for further policy easing. Following his remarks, the probability of a December rate cut surged from 39% to 71%, according to the CME FedWatch Tool, causing Treasury yields to fall. Lower interest rates can be particularly beneficial for growth-oriented sectors like software, as they increase the present value of future earnings. This renewed hope provided a boost to the sector, which had recently faced pressure from concerns over high valuations in artificial intelligence.
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:
- HR Software company Paychex (NASDAQ:PAYX) jumped 3.3%. Is now the time to buy Paychex? Access our full analysis report here, it’s free for active Edge members.
- Project Management Software company Asana (NYSE:ASAN) jumped 3.5%. Is now the time to buy Asana? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Asana (ASAN)
Asana’s shares are extremely volatile and have had 37 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 3 days ago when the stock dropped 2.2% on the news that investors grew increasingly skittish about the strength of the artificial intelligence boom and anxiously awaited key earnings reports. Nvidia slid 3% ahead of its earnings report, dragging down fellow "Magnificent Seven" peers despite a major partnership announcement with Anthropic, as investors increasingly question the durability of the AI rally. Market sentiment was further dampened by Bitcoin dropping below $90,000, signaling reduced risk appetite, and growing anxiety that the Federal Reserve may pause rate cuts in December, with the implied probability of a cut falling to roughly 50%. Adding to the weakness, Home Depot shares declined following an earnings miss and a cut to its full-year outlook. This combination of continued de-risking and valuation skepticism put the S&P 500 on pace for its fourth consecutive daily decline.
Asana is down 38.8% since the beginning of the year, and at $12.14 per share, it is trading 55.9% below its 52-week high of $27.52 from December 2024. Investors who bought $1,000 worth of Asana’s shares 5 years ago would now be looking at an investment worth $551.32.
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