What Happened?

A number of stocks jumped in the afternoon session after a softer-than-expected inflation report fueled hopes for interest rate cuts by the Federal Reserve. The January Consumer Price Index (CPI), a key measure of inflation, rose by 0.2%, which was less than economists had forecast, with the annual rate cooling to 2.4%. This encouraging data increased market expectations for the Fed to begin cutting interest rates as early as June. The news prompted a rally in Treasuries as their yields fell. While the market's reaction was initially described as a "bumpy ride" due to concerns in other sectors, the favorable inflation data ultimately helped calm Wall Street. Lower inflation is a key prerequisite for the central bank to ease its monetary policy, which is generally supportive of stock valuations.

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:

• Therapeutics company Moderna (NASDAQ: MRNA) jumped 5.6%. Is now the time to buy Moderna? Access our full analysis report here, it’s free.
• Therapeutics company Vertex Pharmaceuticals (NASDAQ: VRTX) jumped 6.8%. Is now the time to buy Vertex Pharmaceuticals? Access our full analysis report here, it’s free.
• Surgical Equipment & Consumables - Specialty company Integra LifeSciences (NASDAQ: IART) jumped 6%. Is now the time to buy Integra LifeSciences? Access our full analysis report here, it’s free.
• Medical Devices & Supplies - Diversified company Baxter (NYSE: BAX) jumped 7.3%. Is now the time to buy Baxter? Access our full analysis report here, it’s free.
• Health Insurance Providers company Molina Healthcare (NYSE: MOH) jumped 5.8%. Is now the time to buy Molina Healthcare? Access our full analysis report here, it’s free.

Zooming In On Baxter (BAX)

Baxter’s shares are somewhat volatile and have had 10 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 biggest move we wrote about over the last year was 7 months ago when the stock dropped 20% on the news that the company reported disappointing second-quarter results and cut its full-year profit forecast, citing the lingering impact of a hurricane. The healthcare company pointed to the lingering effects of Hurricane Helene, which damaged a key manufacturing facility and disrupted the supply of its IV solutions. Baxter’s adjusted earnings per share of 59 cents missed analysts' estimates, while revenue of $2.81 billion also came in slightly below expectations. In response to these challenges and what management called demand softness, the company lowered its full-year profit guidance. The weak results and revised outlook prompted a negative reaction from investors.

Baxter is up 1.7% since the beginning of the year, but at $19.84 per share, it is still trading 45.8% below its 52-week high of $36.57 from March 2025. Investors who bought $1,000 worth of Baxter’s shares 5 years ago would now be looking at an investment worth $254.99.

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