What Happened?
A number of stocks jumped in the afternoon session after the SaaS sector continued to rally as favorable inflation data bolstered hopes for a Federal Reserve interest rate cut.
This optimism was largely driven by a benign July Consumer Price Index (CPI) report, which solidified investor expectations for a Federal Reserve interest rate cut. Following the release of the inflation data, which showed a year-over-year increase of 2.7%, the probability of a rate cut in September surged to over 96%. Lower interest rates are typically beneficial for growth-oriented technology stocks, as they can reduce borrowing costs and increase the present value of future earnings. Adding to the positive sentiment was a 90-day delay in the imposition of higher tariffs on Chinese goods, which reduced trade-related uncertainty for the technology sector.
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:
- Customer Experience Software company Sprinklr (NYSE: CXM) jumped 3.4%. Is now the time to buy Sprinklr? Access our full analysis report here, it’s free.
- Design Software company Procore (NYSE: PCOR) jumped 3.4%. Is now the time to buy Procore? Access our full analysis report here, it’s free.
- Vertical Software company Alarm.com (NASDAQ: ALRM) jumped 4.4%. Is now the time to buy Alarm.com? Access our full analysis report here, it’s free.
- Automation Software company Pegasystems (NASDAQ: PEGA) jumped 3.2%. Is now the time to buy Pegasystems? Access our full analysis report here, it’s free.
Zooming In On Alarm.com (ALRM)
Alarm.com’s shares are not very volatile and have only had 5 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.
Alarm.com is down 3.1% since the beginning of the year, and at $57.95 per share, it is trading 15.8% below its 52-week high of $68.81 from December 2024. Investors who bought $1,000 worth of Alarm.com’s shares 5 years ago would now be looking at an investment worth $1,012.
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