What Happened?
A number of stocks fell in the afternoon session after the Fed signaled rate cuts were off the table for 2026.
Major Wall Street banks, including Goldman Sachs and Bank of America, pushed back their forecasts for Federal Reserve interest-rate cuts.
The revised timelines, pointed to December 2026 instead of September, after stronger-than-expected jobs and inflation data suggested the economy might not be cooling enough to warrant earlier action from the central bank.
This shift in expectations led to a rise in Treasury yields. Some analysts at Bank of America even noted that the risk of the Fed hiking rates again might be 'underpriced' by the market, signaling a potentially prolonged period of higher interest rates.
Banks earn money on the difference between what they charge borrowers and pay depositors, the net interest margin. Rate cuts are a mixed signal: they compress margins but stimulate loan demand. With the Fed signaling no cuts, banks lose the demand catalyst needed to grow lending volume.
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:
- Regional Banks company BankUnited (NYSE: BKU) fell 2.7%. Is now the time to buy BankUnited? Access our full analysis report here, it’s free.
- Regional Banks company Pathward Financial (NASDAQ: CASH) fell 2.7%. Is now the time to buy Pathward Financial? Access our full analysis report here, it’s free.
Zooming In On Pathward Financial (CASH)
Pathward Financial’s shares are not very volatile and have only had 3 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 18 days ago when the stock dropped 10.9% on the news that its first-quarter 2026 earnings report showed mixed results that appeared to disappoint investors. While the company's revenue of $276.3 million beat analysts' expectations, it still marked a 1.3% decline from the previous year.
More concerning for investors were misses on key metrics, including Net Interest Income, which fell 3.8% year-over-year to $125.1 million, coming in below estimates.
Furthermore, the company's tangible book value per share of $25.41 missed Wall Street's forecast. Although GAAP earnings per share of $3.35 met expectations, the underperformance in core lending income and key value metrics likely drove the negative market reaction.
Pathward Financial is up 16.5% since the beginning of the year, but at $83.76 per share, it is still trading 16.2% below its 52-week high of $99.93 from April 2026. Investors who bought $1,000 worth of Pathward Financial’s shares 5 years ago would now be looking at an investment worth $1,689.
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