What Happened?
Shares of ride sharing service Lyft (NASDAQ: LYFT) jumped 4% in the afternoon session after the latest Producer Price Index (PPI) report came in softer than expected, fueling speculation of an imminent interest rate cut by the Federal Reserve.
The U.S. Bureau of Labor Statistics reported that the Producer Price Index, a measure of wholesale inflation, unexpectedly fell by 0.1% in August, contrasting with forecasts of a 0.3% rise. This sign of cooling inflation has significantly increased market expectations for a policy shift from the central bank. According to the CME FedWatch Tool, the probability of a 25-basis point rate cut at the Federal Reserve's next meeting has surged to 90%. Lower interest rates typically reduce borrowing costs for companies and can stimulate economic activity, which investors view as a positive catalyst for stock market performance, particularly for growth-sensitive tech stocks.
After the initial pop the shares cooled down to $18.89, up 2.7% from previous close.
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What Is The Market Telling Us
Lyft’s shares are very volatile and have had 25 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 22 days ago when the stock dropped 3.1% on the news that investor apprehension intensified ahead of a key policy speech and perplexing inflation signals clouded the economic outlook, leading to a wider market retreat from growth-oriented stocks. The downturn in the market was largely attributed to a significant sell-off in megacap tech and chipmaker shares. Nvidia, Advanced Micro Devices (AMD), and Broadcom all saw notable drops, dragging down the VanEck Semiconductor ETF. Other major tech-related companies like Tesla, Meta Platforms, and Netflix were also under pressure.
A key reason for this trend is that much of the recent market gains have been concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.
Lyft is up 38.4% since the beginning of the year, and at $18.89 per share, has set a new 52-week high. Investors who bought $1,000 worth of Lyft’s shares 5 years ago would now be looking at an investment worth $639.95.
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