What Happened?

A number of stocks jumped in the afternoon session after an unexpected decline in wholesale inflation reinforced bets that the Federal Reserve will cut interest rates. 

The Producer Price Index (PPI), a measure of inflation at the wholesale level, unexpectedly ticked 0.1% lower in August, contrary to economists' estimates of an increase. This report has soothed concerns that persistent inflation would prevent the central bank from lowering its key interest rate. Following the data, traders are now almost fully pricing in multiple rate reductions in 2025. The prospect of lower rates from the Fed generally leads to lower mortgage rates, which is a significant catalyst for the housing market as it makes financing a home purchase more affordable for consumers.

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:

• Thrifts & Mortgage Finance company Rocket Companies (NYSE: RKT) jumped 3%. Is now the time to buy Rocket Companies? Access our full analysis report here, it’s free.
• Thrifts & Mortgage Finance company Mr. Cooper Group (NASDAQ: COOP) jumped 2.9%. Is now the time to buy Mr. Cooper Group? Access our full analysis report here, it’s free.

Zooming In On Rocket Companies (RKT)

Rocket Companies’s shares are extremely volatile and have had 39 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 5 days ago when the stock gained 6% on the news that positive momentum continued as stockholders approved the company's $9.4 billion all-stock merger with Mr. Cooper Group Inc., and as softer-than-expected U.S. jobs data lifted hopes for an interest rate cut. 

The merger approval is a significant step forward, with Mr. Cooper investors set to receive 11 shares of Rocket Class A common stock for each of their own. This deal will allow Rocket to integrate Mr. Cooper's servicing platform into its operations. Separately, the positive market mood was bolstered by economic data suggesting a potential decrease in interest rates, which would be beneficial for a mortgage lender like Rocket by making borrowing more affordable. The optimism is also supported by the company's recent performance, having beaten Wall Street expectations in the second quarter and provided strong revenue guidance for the third quarter.

Rocket Companies is up 91.9% since the beginning of the year, and at $20.82 per share, has set a new 52-week high. Investors who bought $1,000 worth of Rocket Companies’s shares 5 years ago would now be looking at an investment worth $899.35.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.