What Happened?

A number of stocks fell in the afternoon session after markets pulled back, reversing early gains, as investor sentiment remained cautious despite a softer-than-expected inflation reading. 

Stocks rose in the morning session after an unexpected drop in the Producer Price Index (PPI) for August signaled easing inflation and raised expectations for a potential Federal Reserve interest rate cut. The U.S. Bureau of Labor Statistics reported that the PPI, which measures wholesale prices, edged down 0.1% the previous month, contrary to analyst expectations for a 0.3% rise. This data gives the Federal Reserve more flexibility to consider lowering interest rates to stimulate the economy.

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:

• Health Insurance Providers company Oscar Health (NYSE: OSCR) fell 3.9%. Is now the time to buy Oscar Health? Access our full analysis report here, it’s free.
• Medical Devices & Supplies - Cardiology, Neurology, Vascular company Penumbra (NYSE: PEN) fell 5.4%. Is now the time to buy Penumbra? Access our full analysis report here, it’s free.
• Patient Monitoring company DexCom (NASDAQ: DXCM) fell 3.2%. Is now the time to buy DexCom? Access our full analysis report here, it’s free.
• Medical Devices & Supplies - Cardiology, Neurology, Vascular company Merit Medical Systems (NASDAQ: MMSI) fell 3%. Is now the time to buy Merit Medical Systems? Access our full analysis report here, it’s free.
• Hospital Chains company HCA Healthcare (NYSE: HCA) fell 4.4%. Is now the time to buy HCA Healthcare? Access our full analysis report here, it’s free.

Zooming In On Penumbra (PEN)

Penumbra’s shares are somewhat volatile and have had 11 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 28 days ago when the stock gained 3.6% on the news that markets continued to rally amid growing speculation of an impending interest rate cut by the Federal Reserve. Following a favorable Consumer Price Index (CPI) report, investors are increasingly betting on a rate reduction next month, a sentiment amplified by U.S. Treasury Secretary Scott Bessent's call for a significant cut. This has fueled a 'risk-on' environment across Wall Street. Lower interest rates are typically beneficial for growth-oriented sectors like healthcare, as they reduce the cost of borrowing for research and innovation and increase the present value of future earnings.

Penumbra is up 13.3% since the beginning of the year, but at $271.98 per share, it is still trading 10.5% below its 52-week high of $303.76 from February 2025. Investors who bought $1,000 worth of Penumbra’s shares 5 years ago would now be looking at an investment worth $1,354.

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