What Happened?

A number of stocks jumped in the afternoon session after the Federal Reserve cut interest rates by 25 basis points, signaling a potential boost for consumer spending. This dovish action, combined with highly accommodating signals from Chair Jerome Powell and the Federal Open Market Committee (FOMC), sent the Dow Jones Industrial Average and S&P 500 surging. The market's bullish reaction was rooted in several key takeaways from the Fed's announcement. Most significantly, the central bank confirmed it would begin expanding its balance sheet by buying short-term bonds, a move that injects critical liquidity and lowers short-term Treasury yields. Furthermore, the Fed signaled a shift in priority by removing language that described the labor market as "remaining low," suggesting it would be more focused on supporting economic growth. While the Fed's official forecast projected only one cut for the next year, traders immediately priced in the expectation of more aggressive easing, banking on at least two rate reductions. This widespread anticipation of sustained, low borrowing costs and the virtual certainty that rate hikes would be off the table boosted corporate valuations and created powerful momentum for the equity market rally.

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:

• Wireless, Cable and Satellite company Cable One (NYSE: CABO) jumped 10.3%. Is now the time to buy Cable One? Access our full analysis report here, it’s free for active Edge members.
• Apparel and Accessories company VF Corp (NYSE: VFC) jumped 6.1%. Is now the time to buy VF Corp? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Cable One (CABO)

Cable One’s shares are extremely volatile and have had 39 moves greater than 5% over the last year. But moves this big are rare even for Cable One and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 2 days ago when the stock dropped 4.4% on the news that new economic data intensified market agitation ahead of the Federal Reserve's policy decision later in the week. According to the Bureau of Economic Analysis, real consumer spending, which is adjusted for inflation, stalled in September, marking its weakest performance in four months. Compounding the issue, the University of Michigan's consumer sentiment index, while slightly improved, remained gloomy, with one economist noting that many households faced affordability issues forcing them to be more cautious. This pressure on consumers was reflected in the market, where the Consumer Discretionary sector was among the leading decliners. The broader economic picture showed other signs of caution, as new orders for U.S. factory goods also increased less than anticipated. These indicators collectively suggest a widening slowdown across both consumer and industrial sectors as the Federal Reserve prepared to announce its final policy actions for the year.

Cable One is down 63.9% since the beginning of the year, and at $131.85 per share, it is trading 66.7% below its 52-week high of $395.62 from December 2024. Investors who bought $1,000 worth of Cable One’s shares 5 years ago would now be looking at an investment worth $62.29.

The 1999 book Gorilla Game predicted Microsoft and Apple would dominate tech before it happened. Its thesis? Identify the platform winners early. Today, enterprise software companies embedding generative AI are becoming the new gorillas. Click here for access to our special report that reveals one profitable leader already riding this wave.