What Happened?

A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official hinted at a potential interest rate cut in December. 

John Williams, president of the Federal Reserve Bank of New York, signaled he was open to lowering the fed funds rate—the key interest rate that banks charge each other for overnight loans—to support the job market. Speaking at an event, Williams stated that he sees “room for a further adjustment” for interest rates, which immediately shifted market expectations. Following his remarks, the perceived likelihood of an interest rate cut at the Federal Reserve's December meeting flipped from unlikely to more likely than not. The prospect of lower borrowing costs sent a wave of optimism through the markets, leading to a rally in major indices like the S&P 500, Dow Jones Industrial Average, and the Nasdaq Composite.

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:

• Electronic Components & Manufacturing company Plexus (NASDAQ: PLXS) jumped 4.3%. Is now the time to buy Plexus? Access our full analysis report here, it’s free for active Edge members.
• Hardware & Infrastructure company Dell (NYSE: DELL) jumped 4.9%. Is now the time to buy Dell? Access our full analysis report here, it’s free for active Edge members.
• IT Distribution & Solutions company Avnet (NASDAQ: AVT) jumped 4.3%. Is now the time to buy Avnet? Access our full analysis report here, it’s free for active Edge members.
• Hardware & Infrastructure company NetApp (NASDAQ: NTAP) jumped 4.7%. Is now the time to buy NetApp? Access our full analysis report here, it’s free for active Edge members.
• IT Distribution & Solutions company ScanSource (NASDAQ: SCSC) jumped 5%. Is now the time to buy ScanSource? Access our full analysis report here, it’s free for active Edge members.

Zooming In On ScanSource (SCSC)

ScanSource’s shares are not very volatile and have only had 6 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 biggest move we wrote about over the last year was 3 months ago when the stock gained 12.6% on the news that 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.

ScanSource is down 16% since the beginning of the year, and at $39.52 per share, it is trading 25.6% below its 52-week high of $53.11 from December 2024. Investors who bought $1,000 worth of ScanSource’s shares 5 years ago would now be looking at an investment worth $1,561.

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