What Happened?

A number of stocks jumped in the afternoon session after 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 yesterday 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.

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:

• Data Infrastructure company C3.ai (NYSE: AI) jumped 4.6%. Is now the time to buy C3.ai? Access our full analysis report here, it’s free.
• Vulnerability Management company Rapid7 (NASDAQ: RPD) jumped 4.2%. Is now the time to buy Rapid7? Access our full analysis report here, it’s free.
• Video Conferencing company 8x8 (NASDAQ: EGHT) jumped 8.1%. Is now the time to buy 8x8? Access our full analysis report here, it’s free.
• Project Management Software company monday.com (NASDAQ: MNDY) jumped 8.2%. Is now the time to buy monday.com? Access our full analysis report here, it’s free.
• Data Infrastructure company Confluent (NASDAQ: CFLT) jumped 2.6%. Is now the time to buy Confluent? Access our full analysis report here, it’s free.

Zooming In On monday.com (MNDY)

monday.com’s shares are very volatile and have had 29 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 1 day ago when the stock dropped 3.3% on the news that the Federal Reserve cut its benchmark interest rate by a quarter-point, while signaling one rate cut in 2026 which was lower than expectations. 

The widely anticipated move put the new target range for the federal funds rate at 4% to 4.25%. Policymakers cited a weakening labor market and moderating economic growth as the primary reasons for the cut, signaling a shift in their approach to support the economy. 

However, they also noted that inflation "has moved up and remains somewhat elevated," creating a conflict as the committee balances its dual mandate of stable prices and full employment. Investors continued to look for clues on the pace of future rate cuts as the Fed tries to balance a slowing job market with ongoing inflation. Most Fed Committee members have indicated they expect two more cuts for the year. The Fed's "dot plot" also suggests a much slower pace of cuts than the market currently anticipates. With only one cut implied for 2026 compared to the three that traders priced in, this explained the market pullback after the initial spike that followed the rate cut announcement. 

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.

monday.com is down 10.2% since the beginning of the year, and at $207.49 per share, it is trading 36.7% below its 52-week high of $327.92 from February 2025. Investors who bought $1,000 worth of monday.com’s shares at the IPO in June 2021 would now be looking at an investment worth $1,160.

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.