What Happened?
A number of stocks fell in the afternoon session after investors continued to distinguish between the winners and losers in the artificial intelligence boom, leading to a broad sell-off.
The Nasdaq fell 1.5%, while the S&P 500 and Dow Jones Industrial Average also saw significant declines. This market shift indicated that investors were becoming more selective, moving beyond the initial excitement surrounding AI.
In addition, a stronger-than-expected U.S. jobs report dampened investor expectations for near-term interest rate cuts from the Federal Reserve.
Data showed the U.S. labor market remained resilient, with non-farm payrolls indicating impressive job creation and falling unemployment. This positive economic signal led markets to re-evaluate the timeline for monetary policy easing, which is the process by which a central bank reduces interest rates to stimulate economic growth. Investors priced in the first potential rate cut for July, a shift from previous expectations of June. This delay created a headwind for growth-oriented sectors like software, as higher interest rates can reduce the present value of future earnings.
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:
- Data Analytics company Health Catalyst (NASDAQ:HCAT) fell 6.8%. Is now the time to buy Health Catalyst? Access our full analysis report here, it’s free.
- Content Delivery company F5 (NASDAQ:FFIV) fell 6.7%. Is now the time to buy F5? Access our full analysis report here, it’s free.
Zooming In On Health Catalyst (HCAT)
Health Catalyst’s shares are extremely volatile and have had 48 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 9 days ago when the stock dropped 8.4% on the news that fears of disruption from artificial intelligence spooked investors, leading to a broad-based sell-off. The market witnessed a "basket-style reaction," a term for when investors reduce exposure to an entire segment without differentiating between individual company business models. The negative sentiment was widespread, pulling down all of the Magnificent Seven stocks and sending the S&P 500 Information Technology Sector down nearly 3%.
Health Catalyst is down 18.9% since the beginning of the year, and at $1.85 per share, it is trading 66.7% below its 52-week high of $5.55 from February 2025. Investors who bought $1,000 worth of Health Catalyst’s shares 5 years ago would now be looking at an investment worth $34.46.
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