What Happened?
Shares of pawn store operator FirstCash Holdings (NASDAQ:FCFS) jumped 3% in the afternoon session after the Federal Reserve announced a 0.25% cut to its benchmark interest rate, which boosted broader market sentiment.
The Federal Open Market Committee (FOMC) confirmed its third consecutive rate reduction, which brought the federal funds rate down to a range of 3.50%-3.75%. This decision marked the lowest policy rate in nearly three years. The central bank's move reflected an effort to balance a cooling job market with inflation that remained above the Fed's long-term 2% goal. While the Fed reduced its key rate, it also signaled that it might leave rates unchanged in the coming months.
After the initial pop the shares cooled down to $163.06, up 2.7% from previous close.
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What Is The Market Telling Us
FirstCash’s shares are not very volatile and have only had 5 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 20 days ago when the stock gained 2.6% on the news that investors grew more optimistic about a potential Federal Reserve interest rate cut in December.
The positive sentiment was fueled by comments from New York Fed President John Williams, a voting member of the rate-setting Federal Open Market Committee, who stated the central bank could cut rates "in the near term" without jeopardizing its inflation targets. Following his remarks, market expectations for a rate cut in December shifted significantly. According to the CME FedWatch Tool, the probability of a December rate reduction surged from a 37% chance earlier in the day to 70%. While lower rates can compress bank profit margins, investors often view them as a catalyst for broader economic activity, potentially boosting loan demand and reducing the risk of defaults.
FirstCash is up 58.9% since the beginning of the year, and at $163.06 per share, has set a new 52-week high. Investors who bought $1,000 worth of FirstCash’s shares 5 years ago would now be looking at an investment worth $2,295.
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