What Happened?
Shares of fintech mortgage provider Rocket Companies (NYSE:RKT) jumped 6.8% in the afternoon session after a favorable U.S. inflation report bolstered expectations for an imminent Federal Reserve interest rate cut, a positive development for the mortgage industry. The U.S. Consumer Price Index (CPI) report for July was largely in line with market expectations, a development that increased the chances of a Federal Reserve rate cut at its September meeting to 95%. Lower interest rates are particularly beneficial for the housing sector as they typically translate into lower mortgage rates. This makes homeownership more accessible and stimulates demand, directly benefiting mortgage lenders like Rocket. The positive sentiment was widespread across the market, lifting major U.S. stock indexes.
The shares closed the day at $18.27, up 6.8% from previous close.
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What Is The Market Telling Us
Rocket Companies’s shares are extremely volatile and have had 36 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 8 days ago when the stock gained 3.4% on the news that markets rebounded following a sharp sell-off in the previous trading session as investor optimism grew around a potential Federal Reserve interest rate cut following a weak U.S. jobs report. The softer-than-expected employment data for July fueled bets that the Fed could lower rates as soon as September to support the economy. This sentiment was reflected in the bond market, where the 10-year Treasury yield fell to a three-month low. Adding to the positive momentum, the Federal Deposit Insurance Corporation (FDIC) indicated it may support raising regulatory thresholds for banks, a move that could reduce compliance costs and further boost profitability for financial institutions.
Rocket Companies is up 68.5% since the beginning of the year, but at $18.28 per share, it is still trading 12.2% below its 52-week high of $20.81 from August 2024. Investors who bought $1,000 worth of Rocket Companies’s shares 5 years ago would now be looking at an investment worth $914.
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