Anthony Lee
3 min read
What happened?
A number of stocks jumped in the afternoon session after The Federal Reserve opened its two-day meeting with the 10-year Treasury yield at 4.995%, and futures priced roughly a 90% chance that rates stay in the current 3.75%–4% range, as reported by CNBC. September durable-goods orders rose 1.8%, a touch above the 1.7% gain economists polled by Dow Jones had expected. The decision comes later in the week, and Chair Kevin Warsh’s press conference is where investors will listen for any sign of another hike before year-end.In addition to policy anticipations, resilient corporate updates reinforced market optimism, highlighted by United Parcel Service lifting its full-year guidance following better-than-expected profit results. Together, anticipation surrounding interest rate stability and robust corporate performance fueled widespread optimism across Wall Street.
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:
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Aerospace company Redwire(NYSE:RDW) jumped 7.7%. Is now the time to buy Redwire? Access our full analysis report here, it’s free.
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Electrical systems company Methode Electronics(NYSE:MEI) jumped 12.7%. Is now the time to buy Methode Electronics? Access our full analysis report here, it’s free.
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Renewable energy company EVgo(NASDAQ:EVGO) jumped 11.3%. Is now the time to buy EVgo? Access our full analysis report here, it’s free.
Zooming in on Methode Electronics (MEI)
Methode Electronics’s shares are extremely volatile and have had 55 moves greater than 5% over the last year. But moves this big are rare even for Methode Electronics and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 20 days ago when the stock dropped 8% on the news that rising Treasury yields and climbing oil prices dampened investor sentiment ahead of the release of the Federal Reserve’s September meeting minutes, as reported by AP News. Yields on benchmark U.S. government debt pushed higher, with the 10-year Treasury yield reaching 5.33% and the 30-year yield advancing to 5.71%. Elevated bond yields increase borrowing costs throughout the economy and reduce the present value of future corporate earnings, which typically weighs on equity valuations. Market participants are closely watching the upcoming minutes from the Federal Reserve’s September gathering following its benchmark interest rate increase. Investors are seeking clarity regarding the central bank’s future policy path and how long borrowing costs might remain elevated to curb inflation. Meanwhile, firmer crude oil prices introduce additional uncertainty surrounding corporate expense structures and the pace of broader economic expansion.
