What Happened?
A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official boosted hopes for an interest rate cut. New York Federal Reserve President John Williams stated he sees “room for a further adjustment” in the near term, sparking a significant market rally. Following his remarks, the probability of the central bank cutting rates at its December meeting jumped from 39% to over 73%, according to the CME FedWatch tool. This positive sentiment provided relief to markets amid concerns over high valuations, particularly in AI-related stocks.
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:
- Regional Banks company Pathward Financial (NASDAQ:CASH) jumped 4%. Is now the time to buy Pathward Financial? Access our full analysis report here, it’s free for active Edge members.
- Regional Banks company Lake City Bank (NASDAQ:LKFN) jumped 4.2%. Is now the time to buy Lake City Bank? Access our full analysis report here, it’s free for active Edge members.
- Regional Banks company Home Bancshares (NYSE:HOMB) jumped 4.1%. Is now the time to buy Home Bancshares? Access our full analysis report here, it’s free for active Edge members.
- Regional Banks company First Financial Bancorp (NASDAQ:FFBC) jumped 4.1%. Is now the time to buy First Financial Bancorp? Access our full analysis report here, it’s free for active Edge members.
- Regional Banks company FB Financial (NYSE:FBK) jumped 4.1%. Is now the time to buy FB Financial? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Lake City Bank (LKFN)
Lake City Bank’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 dropped 6.1% on the news that the stock pulled back in an apparent reversal of a rally from the previous session. The decline appears to be a reversal of gains from the previous trading session when the stock jumped 5.3%. That rally was part of a broader surge among regional banks, sparked by dovish comments from Federal Reserve Chair Jerome Powell at the Jackson Hole symposium. Powell's remarks suggested that moderating inflation could lead to potential interest rate cuts, which eased concerns about prolonged high borrowing costs for banks. The pullback suggests that after the initial optimism, investors may be taking profits and reassessing the sector's near-term outlook following the sharp run-up.
Lake City Bank is down 12.5% since the beginning of the year, and at $58.88 per share, it is trading 22.4% below its 52-week high of $75.85 from November 2024. Investors who bought $1,000 worth of Lake City Bank’s shares 5 years ago would now be looking at an investment worth $1,094.
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