What Happened?

A number of stocks fell in the afternoon session after markets pulled back as a hotter-than-expected wholesale inflation report for July dampened hopes for a Federal Reserve interest rate cut. The U.S. Producer Price Index (PPI), a key measure of wholesale inflation, rose 0.9% month-over-month in July, far exceeding the 0.2% increase that economists had predicted. Annually, prices at the wholesale level jumped 3.3%, also surpassing the 2.5% forecast. This hotter-than-expected data has poured cold water on widespread expectations for an interest rate cut from the Federal Reserve next month. Persistent inflation makes it less likely for the central bank to ease monetary policy. Sectors with high-growth stocks, such as SaaS, are particularly sensitive to interest rate changes, as the prospect of higher rates for longer can diminish the present value of their future earnings, leading to a decline in stock prices.

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 Infrastructure company C3.ai (NYSE: AI) fell 3.1%. Is now the time to buy C3.ai? Access our full analysis report here, it’s free.
• Data Analytics company Health Catalyst (NASDAQ: HCAT) fell 9.5%. Is now the time to buy Health Catalyst? Access our full analysis report here, it’s free.
• Lending Software company Upstart (NASDAQ: UPST) fell 5.1%. Is now the time to buy Upstart? Access our full analysis report here, it’s free.
• Listing Management Software company Semrush (NYSE: SEMR) fell 3.5%. Is now the time to buy Semrush? Access our full analysis report here, it’s free.
• Payments Software company Flywire (NASDAQ: FLYW) fell 3.2%. Is now the time to buy Flywire? 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 43 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 1 day ago when the stock gained 7.5% after the SaaS sector continued to rally as favorable inflation data bolstered hopes for a Federal Reserve interest rate cut. This optimism was largely driven by a benign July Consumer Price Index (CPI) report, which solidified investor expectations for a Federal Reserve interest rate cut. Following the release of the inflation data, which showed a year-over-year increase of 2.7%, the probability of a rate cut in September surged to over 96%. Lower interest rates are typically beneficial for growth-oriented technology stocks, as they can reduce borrowing costs and increase the present value of future earnings. Adding to the positive sentiment was a 90-day delay in the imposition of higher tariffs on Chinese goods, which reduced trade-related uncertainty for the technology sector.

Health Catalyst is down 60.2% since the beginning of the year, and at $2.92 per share, it is trading 67.6% below its 52-week high of $9.02 from December 2024. Investors who bought $1,000 worth of Health Catalyst’s shares 5 years ago would now be looking at an investment worth $93.20.

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