What Happened?
Shares of payment solutions provider WEX (NYSE:WEX) jumped 4.9% 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 shares closed the day at $146.06, up 4.4% from previous close.
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What Is The Market Telling Us
WEX’s shares are somewhat volatile and have had 11 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 21 days ago when the stock dropped 3.5% on the news that an analyst at UBS lowered the price target on the company's shares. The firm adjusted its price target to $172 from $185 but kept its rating at Neutral, signaling a more cautious view on the stock's near-term performance. This move came even as WEX reported third-quarter financial results that beat expectations. The company posted earnings per share of $4.59 on revenue of $691.8 million, surpassing forecasts. However, the positive results were overshadowed by concerns about ongoing challenges in the trucking sector, which impacted the company's Mobility segment and contributed to mixed investor sentiment.
WEX is down 16.6% since the beginning of the year, and at $146.06 per share, it is trading 23% below its 52-week high of $189.80 from November 2024. Investors who bought $1,000 worth of WEX’s shares 5 years ago would now be looking at an investment worth $806.62.
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