What Happened?
A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official boosted hopes for an interest rate cut.
New York Fed President John Williams stated that he sees “room for a further adjustment” for interest rates in the near term. Following his speech, traders increased their bets on a rate cut, with the probability of a December reduction jumping from around 39% to over 70%, according to data from CME Group. The positive sentiment was also reflected in the bond market, where the yield on the 10-year Treasury, a benchmark for mortgage rates, eased following the comments.
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:
- Regional Banks company M&T Bank (NYSE:MTB) jumped 3.5%. Is now the time to buy M&T Bank? Access our full analysis report here, it’s free for active Edge members.
- Regional Banks company Eastern Bank (NASDAQ:EBC) jumped 5.1%. Is now the time to buy Eastern Bank? Access our full analysis report here, it’s free for active Edge members.
- Regional Banks company Byline Bancorp (NYSE:BY) jumped 3.4%. Is now the time to buy Byline Bancorp? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Eastern Bank (EBC)
Eastern Bank’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 about 1 month ago when the stock dropped 8% on the news that disclosures from two lenders raised concerns about deteriorating loan quality across the industry. The drop was triggered by specific incidents that have spooked investors. Zions Bancorp announced a $50 million charge-off—a debt the bank doesn't expect to collect—on a single loan. Separately, Western Alliance Bancorp revealed it was dealing with a borrower who had failed to provide proper collateral. These events are compounding existing anxieties about the regional banking sector, which is already under pressure from elevated interest rates and declining commercial real estate values. The news heightened investor concerns that more cracks could appear in borrowers' creditworthiness, potentially leading to increased loan losses and reduced profitability for other banks in the sector.
Eastern Bank is up 7.5% since the beginning of the year, and at $18.22 per share, it is trading close to its 52-week high of $19.15 from February 2025. Investors who bought $1,000 worth of Eastern Bank’s shares 5 years ago would now be looking at an investment worth $1,257.
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