What Happened?
A number of stocks jumped in the afternoon session after investors grew more optimistic about a potential Federal Reserve interest rate cut in December.
The positive sentiment was fueled by comments from New York Fed President John Williams, a voting member of the rate-setting Federal Open Market Committee, who stated the central bank could cut rates "in the near term" without jeopardizing its inflation targets. Following his remarks, market expectations for a rate cut in December shifted significantly. According to the CME FedWatch Tool, the probability of a December rate reduction surged from a 37% chance earlier in the day to 70%. While lower rates can compress bank profit margins, investors often view them as a catalyst for broader economic activity, potentially boosting loan demand and reducing the risk of defaults.
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:
- Diversified Financial Services company PayPal (NASDAQ:PYPL) jumped 4.4%. Is now the time to buy PayPal? Access our full analysis report here, it’s free for active Edge members.
- Student Loan company Sallie Mae (NASDAQ:SLM) jumped 4.3%. Is now the time to buy Sallie Mae? Access our full analysis report here, it’s free for active Edge members.
Zooming In On PayPal (PYPL)
PayPal’s shares are somewhat volatile and have had 12 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 24 days ago when the stock gained 10.8% on the news that the company reported third-quarter results that surpassed Wall Street's expectations for both revenue and profit. The digital payments giant posted revenue of $8.42 billion, up 7.3% from the prior year, driven by strong growth in total payment volume, which climbed 8.4% to $458.1 billion. Both figures came in ahead of analyst forecasts. Profitability was also a key highlight, with adjusted earnings per share of $1.34, beating consensus estimates by a significant 11.2%. Furthermore, the company's adjusted earnings guidance for the full year also topped market expectations, signaling operational strength. PayPal also announced it will be issuing its first-ever quarterly dividend. Separately, the company announced a major partnership with OpenAI, which will integrate PayPal as a payment method within ChatGPT. This combination of strategic AI integration, strong financial performance, and increased shareholder returns drove the stock significantly higher.
PayPal is down 29.6% since the beginning of the year, and at $60.65 per share, it is trading 33.9% below its 52-week high of $91.81 from January 2025. Investors who bought $1,000 worth of PayPal’s shares 5 years ago would now be looking at an investment worth $302.01.
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