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:

• Data Analytics company Health Catalyst (NASDAQ: HCAT) jumped 15.8%. Is now the time to buy Health Catalyst? Access our full analysis report here, it’s free for active Edge members.
• Virtual Events Software company ON24 (NYSE: ONTF) jumped 6.5%. Is now the time to buy ON24? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Health Catalyst (HCAT)

Health Catalyst’s shares are extremely volatile and have had 47 moves greater than 5% over the last year. But moves this big are rare even for Health Catalyst and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 1 day ago when the stock dropped 2.6% on the news that markets faded the Nvidia rally in the morning session, as investors remained uncertain about future rate cuts. 

While the trading day began with significant enthusiasm, pushing the Dow Jones Industrial Average up more than 700 points and the Nasdaq Composite up 2.6%, momentum quickly evaporated as the session wore on. The primary catalyst for this sharp reversal was a stronger-than-expected jobs report, which reduced the implied odds of a December interest rate cut to less than 40%. This macroeconomic anxiety overshadowed stellar corporate performance. Nvidia initially surged 5% on blockbuster earnings and CEO Jensen Huang's bullish outlook on "off the charts" demand for Blackwell chips. However, the stock eventually turned negative, acting as a heavy weight that dragged the broader indices into the red. The sell-off partly reflects a deepening caution regarding high-flying tech valuations in a "higher-for-longer" rate environment. Consequently, investors appeared to rotate capital away from volatile growth sectors and toward defensive staples, evidenced by Walmart's 6% gain following its own earnings beat. Ultimately, the market could not sustain the morning's euphoria, as traders prioritized rate realities over AI potential.

Health Catalyst is down 67.9% since the beginning of the year, and at $2.36 per share, it is trading 73.9% below its 52-week high of $9.02 from December 2024. Investors who bought $1,000 worth of Health Catalyst’s shares 5 years ago would now be looking at an investment worth $67.46.

While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without. Click here to access our full research report.