What Happened?
A number of stocks jumped in the afternoon session after cooler-than-expected inflation data ignited investor optimism for a potential Federal Reserve interest rate cut. The July Consumer Price Index (CPI) report, an important measure of inflation, came in cooler than expected, showing prices holding steady at an annual rate of 2.7%. This data has led to speculation that the Federal Reserve might lower interest rates. For growth-focused sectors like SaaS, lower interest rates are particularly beneficial as they increase the present value of companies' future earnings, making their stocks more appealing.
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:
- Video Conferencing company 8x8 (NASDAQ: EGHT) jumped 5.4%. Is now the time to buy 8x8? Access our full analysis report here, it’s free.
- Automation Software company SoundHound AI (NASDAQ: SOUN) jumped 3.5%. Is now the time to buy SoundHound AI? Access our full analysis report here, it’s free.
- Communications Platform company Twilio (NYSE: TWLO) jumped 3.2%. Is now the time to buy Twilio? Access our full analysis report here, it’s free.
- Design Software company Unity (NYSE: U) jumped 10.2%. Is now the time to buy Unity? Access our full analysis report here, it’s free.
- Communications Platform company Bandwidth (NASDAQ: BAND) jumped 4.4%. Is now the time to buy Bandwidth? Access our full analysis report here, it’s free.
Zooming In On Unity (U)
Unity’s shares are extremely volatile and have had 54 moves greater than 5% over the last year. But moves this big are rare even for Unity and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 8 days ago when the stock gained 7.2% on the news that the Software as a Service (SaaS) sector rebounded following the sell-off in the previous trading session as a weaker-than-expected U.S. jobs report increased the probability of a Federal Reserve interest rate cut. The July Nonfarm Payrolls (NFP) report showed the U.S. economy added only 73,000 jobs, significantly below the 110,000 forecast. This, combined with downward revisions for May and June, signaled a cooling labor market to investors. In response, market expectations for a September interest rate cut by the Federal Reserve surged from roughly 40% to over 80%. A potential rate cut is generally favorable for growth sectors like technology and SaaS, as lower rates can increase the present value of their future earnings, boosting stock valuations.
Unity is up 48.7% since the beginning of the year, and at $36.44 per share, it is trading close to its 52-week high of $36.75 from July 2025. Investors who bought $1,000 worth of Unity’s shares at the IPO in September 2020 would now be looking at an investment worth $533.07.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
