What Happened?

A number of stocks fell in the afternoon session after the Federal Reserve cut its benchmark interest rate by a quarter-point, while signaling one rate cut in 2026 which was lower than expectations. 

The widely anticipated move put the new target range for the federal funds rate at 4% to 4.25%. Policymakers cited a weakening labor market and moderating economic growth as the primary reasons for the cut, signaling a shift in their approach to support the economy. However, they also noted that inflation "has moved up and remains somewhat elevated," creating a conflict as the committee balances its dual mandate of stable prices and full employment. Investors continued to look for clues on the pace of future rate cuts as the Fed tries to balance a slowing job market with ongoing inflation. Most Fed Committee members have indicated they expect two more cuts for the year. 

The Fed's "dot plot" also suggests a much slower pace of cuts than the market currently anticipates. With only one cut implied for 2026 compared to the three that traders priced in, this explained the market pullback after the initial spike that followed the rate cut announcement. 

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.

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:

• Project Management Software company monday.com (NASDAQ: MNDY) fell 3.3%. Is now the time to buy monday.com? Access our full analysis report here, it’s free.
• Data Storage company MongoDB (NASDAQ: MDB) fell 2.5%. Is now the time to buy MongoDB? Access our full analysis report here, it’s free.

Zooming In On monday.com (MNDY)

monday.com’s shares are very volatile and have had 28 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 7 days ago when the stock dropped 3.1% on the news that markets pulled back, reversing early gains, as investor sentiment remained cautious despite a softer-than-expected inflation reading. Stocks rose in the morning session after an unexpected drop in the Producer Price Index (PPI) for August signaled easing inflation and raised expectations for a potential Federal Reserve interest rate cut. The U.S. Bureau of Labor Statistics reported that the PPI, which measures wholesale prices, edged down 0.1% last month, contrary to analyst expectations for a 0.3% rise. This data gives the Federal Reserve more flexibility to consider lowering interest rates to stimulate the economy.

monday.com is down 18.4% since the beginning of the year, and at $188.60 per share, it is trading 42.5% below its 52-week high of $327.92 from February 2025. Investors who bought $1,000 worth of monday.com’s shares at the IPO in June 2021 would now be looking at an investment worth $1,054.

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