A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official boosted investor optimism for a potential interest rate cut. New York Federal Reserve President John Williams, a voting member of the rate-setting committee, suggested he sees room for "further policy easing," which sent a strong signal to the markets. Following his remarks, the probability of a December rate cut, as measured by the CME FedWatch Tool, surged from 39% to 71%. Lower interest rates can stimulate the economy by making borrowing cheaper for both consumers and businesses, which often translates to increased consumer spending. This prospect is outweighing recent reports of lower consumer confidence, as investors bet that a more accommodative Fed policy will support retailers through the holiday season.

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:

Apparel Retailer company American Eagle (NYSE:AEO) jumped 6.4%. Is now the time to buy American Eagle? Access our full analysis report here, it’s free for active Edge members.

Department Store company Macy's (NYSE:M) jumped 6.4%. Is now the time to buy Macy's? Access our full analysis report here, it’s free for active Edge members.

Sports & Outdoor Equipment Retailer company Academy Sports (NASDAQ:ASO) jumped 6.4%. Is now the time to buy Academy Sports? Access our full analysis report here, it’s free for active Edge members.

Department Store company Kohl's (NYSE:KSS) jumped 6.1%. Is now the time to buy Kohl's? Access our full analysis report here, it’s free for active Edge members.

Beauty and Cosmetics Retailer company Sally Beauty (NYSE:SBH) jumped 6.1%. Is now the time to buy Sally Beauty? Access our full analysis report here, it’s free for active Edge members.

Academy Sports’s shares are very volatile and have had 21 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 25 days ago when the stock gained 3.3% on the news that optimism surged over a potential trade truce between the U.S. and China. Reports of progress in trade negotiations ahead of a scheduled meeting between the two nations' presidents fueled investor confidence. An agreement would likely ease trade tensions and reduce or remove tariffs that have created economic uncertainty and higher costs for many multinational corporations. Also, optimism improved on expectations that the Federal Reserve will cut interest rates later in the week, especially after recent data showed inflation wasn't heating up as much as expected. Simply put, good news on trade, and the promise of lower borrowing costs created a powerful rally.

Academy Sports is down 21.9% since the beginning of the year, and at $44.19 per share, it is trading 27.8% below its 52-week high of $61.17 from December 2024. Investors who bought $1,000 worth of Academy Sports’s shares 5 years ago would now be looking at an investment worth $2,762.

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