What Happened?
Shares of social media management platform Sprout Social (NASDAQ:SPT) jumped 3% in the morning session after the stock traded higher in sympathy with the broader market as Federal Reserve Chair Jerome Powell hinted at potential interest rate cuts. The move appears to be linked to a broader market rally following dovish remarks from Fed Chair Jerome Powell at the Jackson Hole symposium. Powell suggested that moderating inflation risks could lead the Federal Reserve to consider interest rate cuts, which eased market concerns about the impact of prolonged high rates on economic growth. This prospect of lower borrowing costs bolstered investor confidence, particularly in the technology sector.
After the initial pop the shares cooled down to $15.31, up 2.9% from previous close.
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What Is The Market Telling Us
Sprout Social’s shares are very volatile and have had 22 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 2 days ago when the stock dropped 3.7% on the news that the major indices continued to pull back, with technology stocks accounting for most of the market's largest decliners. A key reason for this trend is that much of the recent market gains were concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed. Despite the downturn, some analysts viewed this as an opportunity to own some of the "Core AI winners." Dan Ives of Wedbush Securities commented, "In our view, the tech bull cycle will be well intact for at least another 2-3 years, given the trillions being spent on AI infrastructure/software/chips/power/apps looking ahead. This remains our tech playbook and investor roadmap." Additionally, mixed earnings reports from retailers, such as Target, have added to the market's weakness. Investors are closely monitoring these reports for insights into the broader economic health and the potential impact of new tariffs on inflation.
Sprout Social is down 50.1% since the beginning of the year, and at $15.31 per share, it is trading 57.8% below its 52-week high of $36.24 from December 2024. Investors who bought $1,000 worth of Sprout Social’s shares 5 years ago would now be looking at an investment worth $447.98.
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