What Happened?
A number of stocks fell in the afternoon session after new economic data intensified market agitation ahead of the Federal Reserve's policy decision later in the week.
According to the Bureau of Economic Analysis, real consumer spending, which is adjusted for inflation, stalled in September, marking its weakest performance in four months. Compounding the issue, the University of Michigan's consumer sentiment index, while slightly improved, remained gloomy, with one economist noting that many households faced affordability issues forcing them to be more cautious. This pressure on consumers was reflected in the market, where the Consumer Discretionary sector was among the leading decliners. The broader economic picture showed other signs of caution, as new orders for U.S. factory goods also increased less than anticipated. These indicators collectively suggest a widening slowdown across both consumer and industrial sectors as the Federal Reserve prepared to announce its final policy actions for the year.
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:
- Apparel and Accessories company Levi's (NYSE:LEVI) fell 2.7%. Is now the time to buy Levi's? Access our full analysis report here, it’s free for active Edge members.
- Education Services company Bright Horizons (NYSE:BFAM) fell 3.1%. Is now the time to buy Bright Horizons? Access our full analysis report here, it’s free for active Edge members.
- Education Services company Universal Technical Institute (NYSE:UTI) fell 3%. Is now the time to buy Universal Technical Institute? Access our full analysis report here, it’s free for active Edge members.
- Education Services company Laureate Education (NASDAQ:LAUR) fell 2.7%. Is now the time to buy Laureate Education? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Bright Horizons (BFAM)
Bright Horizons’s shares are not very volatile and have only had 9 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 17 days ago when the stock gained 3.5% on the news that 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.
Bright Horizons is down 9.9% since the beginning of the year, and at $99.56 per share, it is trading 24.3% below its 52-week high of $131.50 from May 2025. Investors who bought $1,000 worth of Bright Horizons’s shares 5 years ago would now be looking at an investment worth $590.51.
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