What Happened?
A number of stocks jumped in the afternoon session after cooler-than-expected inflation data reignited hopes for Federal Reserve interest rate cuts.
The November Consumer Price Index (CPI), a key measure of inflation, rose 2.7% year-over-year, coming in below economists' expectations of a 3.1% increase. Similarly, "core" inflation, which excludes volatile food and energy prices, rose 2.6%, beating the consensus forecast of 3.0%. This encouraging report meant that inflationary pressures were easing more quickly than anticipated. As a result, investors grew more optimistic that the Federal Reserve would have the flexibility to cut interest rates in the near future. Lower interest rates generally reduce borrowing costs for companies and can make stocks, particularly growth-oriented tech shares, more attractive to investors.
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:
- Lending Software company Upstart (NASDAQ:UPST) jumped 5.7%. Is now the time to buy Upstart? Access our full analysis report here, it’s free for active Edge members.
- Developer Operations company JFrog (NASDAQ:FROG) jumped 3.3%. Is now the time to buy JFrog? Access our full analysis report here, it’s free for active Edge members.
- Data Storage company Snowflake (NYSE:SNOW) jumped 2.6%. Is now the time to buy Snowflake? Access our full analysis report here, it’s free for active Edge members.
- Hospitality & Restaurant Software company Toast (NYSE:TOST) jumped 2.9%. Is now the time to buy Toast? Access our full analysis report here, it’s free for active Edge members.
- Data Storage company MongoDB (NASDAQ:MDB) jumped 3.3%. Is now the time to buy MongoDB? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Upstart (UPST)
Upstart’s shares are extremely volatile and have had 74 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 3 days ago when the stock dropped 4.5% as investors grew increasingly concerned that the billions of dollars being invested into artificial intelligence may not generate sufficient profits. This sentiment fueled fears of a potential "AI bubble," leading to a significant downturn in the technology-heavy Nasdaq Composite index. The selloff was intensified after chipmaker Broadcom warned that increased sales of AI systems could lead to thinner profit margins, causing its stock to tumble. Subsequently, the broader market questioned whether the massive spending on chips and data centers would produce a worthwhile return on investment. This uncertainty caused a market recalibration, with investors rotating capital out of more speculative tech stocks and into more stable assets.
Upstart is down 21.9% since the beginning of the year, and at $47.48 per share, it is trading 46.5% below its 52-week high of $88.77 from February 2025. Investors who bought $1,000 worth of Upstart’s shares 5 years ago would now be looking at an investment worth $1,077.
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