What Happened?
A number of stocks jumped in the afternoon session after the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium. Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.
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:
- Regional Banks company Popular (NASDAQ: BPOP) jumped 3.1%. Is now the time to buy Popular? Access our full analysis report here, it’s free.
- Heavy Transportation Equipment company REV Group (NYSE: REVG) jumped 3.1%. Is now the time to buy REV Group? Access our full analysis report here, it’s free.
- Commercial Building Products company Johnson Controls (NYSE: JCI) jumped 3.1%. Is now the time to buy Johnson Controls? Access our full analysis report here, it’s free.
- Electrical Systems company Allegion (NYSE: ALLE) jumped 3%. Is now the time to buy Allegion? Access our full analysis report here, it’s free.
Zooming In On Popular (BPOP)
Popular’s shares are not very volatile and have only had 7 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 21 days ago when the stock dropped 3.5% on the news that a surprisingly weak July jobs report and the announcement of sweeping new tariffs fueled fears of an economic slowdown and an impending interest rate cut. The U.S. economy added just 73,000 jobs in July, the weakest gain in over two years, while the unemployment rate rose to 4.2%. This dismal data significantly increased market expectations for a Federal Reserve interest rate cut, with traders now pricing in an 80% probability of a cut in September. Lower interest rates typically harm bank profitability by compressing their net interest margins—the difference between what they earn on loans and pay on deposits. Compounding these worries, the announcement of new tariffs on imports from 92 countries has sparked fears of a global trade war, which could further dampen economic growth and disrupt supply chains, creating a challenging environment for the banking industry.
Popular is up 31.8% since the beginning of the year, and at $122.23 per share, has set a new 52-week high. Investors who bought $1,000 worth of Popular’s shares 5 years ago would now be looking at an investment worth $3,192.
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