What Happened?

A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official bolstered hopes for an interest rate cut. New York Federal Reserve President John Williams stated he sees “room for a further adjustment” in the near term, sparking a significant market rally. Following his remarks, the probability of the central bank cutting rates at its December meeting jumped from 39% to over 73%, according to the CME FedWatch tool. This positive sentiment provided relief to markets amid concerns over high valuations, particularly in AI-related stocks.

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:

• Surgical Equipment & Consumables - Diversified company Zimmer Biomet (NYSE: ZBH) jumped 3.4%. Is now the time to buy Zimmer Biomet? Access our full analysis report here, it’s free for active Edge members.
• Health Insurance Providers company Cigna (NYSE: CI) jumped 3.3%. Is now the time to buy Cigna? Access our full analysis report here, it’s free for active Edge members.
• Hospital Chains company Universal Health Services (NYSE: UHS) jumped 3.9%. Is now the time to buy Universal Health Services? Access our full analysis report here, it’s free for active Edge members.
• Dental Equipment & Technology company Henry Schein (NASDAQ: HSIC) jumped 3.7%. Is now the time to buy Henry Schein? Access our full analysis report here, it’s free for active Edge members.
• Research Tools & Consumables company Sotera Health Company (NASDAQ: SHC) jumped 3.5%. Is now the time to buy Sotera Health Company? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Universal Health Services (UHS)

Universal Health Services’s shares are not very volatile and have only had 8 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 biggest move we wrote about over the last year was 7 months ago when the stock dropped 9.6% on the news that President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth. 

Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy. Meanwhile, Fed Chair Jerome Powell maintained a cautious stance the previous week, highlighting the difficulty of balancing the dual mandate of steady employment and price stability amid the escalating trade tension. Investor sentiment was further dampened by the absence of constructive progress in trade negotiations, especially US-China relations which took a turn for the worse in the previous week. Overall, the outlook seemed more unclear heading into the first quarter 2025 earnings season, as a combination of hard to predict monetary policy and unresolved trade tensions weighed on business confidence.

Universal Health Services is up 29.1% since the beginning of the year, and at $231.97 per share, has set a new 52-week high. Investors who bought $1,000 worth of Universal Health Services’s shares 5 years ago would now be looking at an investment worth $1,768.

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