What Happened?
A number of stocks jumped in the afternoon session after cooler-than-expected inflation data ignited investor optimism for a potential Federal Reserve interest rate cut. The July Consumer Price Index (CPI) report, an important measure of inflation, came in cooler than expected, showing prices holding steady at an annual rate of 2.7%. This data has led to speculation that the Federal Reserve might lower interest rates. For growth-focused sectors like SaaS, lower interest rates are particularly beneficial as they increase the present value of companies' future earnings, making their stocks more appealing.
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:
- Tax Software company BlackLine (NASDAQ:BL) jumped 3.2%. Is now the time to buy BlackLine? Access our full analysis report here, it’s free.
- Listing Management Software company Semrush (NYSE:SEMR) jumped 5.3%. Is now the time to buy Semrush? Access our full analysis report here, it’s free.
- Data Storage company Commvault Systems (NASDAQ:CVLT) jumped 4.3%. Is now the time to buy Commvault Systems? Access our full analysis report here, it’s free.
- Hospitality & Restaurant Software company Agilysys (NASDAQ:AGYS) jumped 3.5%. Is now the time to buy Agilysys? Access our full analysis report here, it’s free.
- Data Storage company MongoDB (NASDAQ:MDB) jumped 3.3%. Is now the time to buy MongoDB? Access our full analysis report here, it’s free.
Zooming In On Semrush (SEMR)
Semrush’s shares are very volatile and have had 23 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 8 days ago when the stock gained 8.5% on the news that the Software as a Service (SaaS) sector rebounded following the sell-off in the previous trading session as a weaker-than-expected U.S. jobs report increased the probability of a Federal Reserve interest rate cut. The July Nonfarm Payrolls (NFP) report showed the U.S. economy added only 73,000 jobs, significantly below the 110,000 forecast. This, combined with downward revisions for May and June, signaled a cooling labor market to investors. In response, market expectations for a September interest rate cut by the Federal Reserve surged from roughly 40% to over 80%. A potential rate cut is generally favorable for growth sectors like technology and SaaS, as lower rates can increase the present value of their future earnings, boosting stock valuations.
Semrush is down 36.8% since the beginning of the year, and at $7.42 per share, it is trading 59.6% below its 52-week high of $18.37 from February 2025. Investors who bought $1,000 worth of Semrush’s shares at the IPO in March 2021 would now be looking at an investment worth $660.87.
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