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:
- Custody Bank company Cohen & Steers (NYSE:CNS) jumped 2.9%. Is now the time to buy Cohen & Steers? Access our full analysis report here, it’s free for active Edge members.
- Investment Banking & Brokerage company PJT (NYSE:PJT) jumped 2.9%. Is now the time to buy PJT? Access our full analysis report here, it’s free for active Edge members.
- Credit Card company Capital One (NYSE:COF) jumped 3%. Is now the time to buy Capital One? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Capital One (COF)
Capital One’s shares are not very volatile and have only had 9 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 previous big move we wrote about was about 1 month ago when the stock gained 3.6% on the news that the company announced third-quarter 2025 results that surpassed Wall Street's expectations for both revenue and profit. The company posted revenue of $15.36 billion, a 53.4% increase from the same period last year and ahead of analysts' estimates. Earnings per share (EPS) came in at $4.83, significantly outperforming the consensus forecast by 35.4%. A key driver of the strong performance was the company's net interest margin, which measures lending profitability and reached 8.4%, beating expectations. This signaled improved returns on its loan and credit card portfolios. However, the company's efficiency ratio, a measure of expenses relative to revenue, was worse than anticipated, indicating higher operational costs.
Capital One is up 16.1% since the beginning of the year, but at $207.48 per share, it is still trading 9.7% below its 52-week high of $229.74 from September 2025. Investors who bought $1,000 worth of Capital One’s shares 5 years ago would now be looking at an investment worth $2,377.
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