What Happened?

A number of stocks jumped in the afternoon session after investors grew more optimistic about a potential Federal Reserve interest rate cut in December. 

The positive sentiment was fueled by comments from New York Fed President John Williams, a voting member of the rate-setting Federal Open Market Committee, who stated the central bank could cut rates "in the near term" without jeopardizing its inflation targets. Following his remarks, market expectations for a rate cut in December shifted significantly. According to the CME FedWatch Tool, the probability of a December rate reduction surged from a 37% chance earlier in the day to 70%. While lower rates can compress bank profit margins, investors often view them as a catalyst for broader economic activity, potentially boosting loan demand and reducing the risk of defaults.

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:

• Personal Loan company Dave (NASDAQ: DAVE) jumped 4.1%. Is now the time to buy Dave? Access our full analysis report here, it’s free for active Edge members.
• Student Loan company Navient (NASDAQ: NAVI) jumped 4.1%. Is now the time to buy Navient? Access our full analysis report here, it’s free for active Edge members.
• Personal Loan company Enova (NYSE: ENVA) jumped 4.1%. Is now the time to buy Enova? Access our full analysis report here, it’s free for active Edge members.
• Specialty Finance company Encore Capital Group (NASDAQ: ECPG) jumped 4.1%. Is now the time to buy Encore Capital Group? Access our full analysis report here, it’s free for active Edge members.
• Personal Loan company Nubank (NYSE: NU) jumped 3.9%. Is now the time to buy Nubank? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Encore Capital Group (ECPG)

Encore Capital Group’s shares are quite volatile and have had 18 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 15 days ago when the stock gained 13.1% on the news that the company reported third-quarter 2025 results that significantly surpassed Wall Street's expectations. The company posted revenue of $460.4 million, a 25.4% increase year on year, which beat analyst forecasts by nearly 12%. Its earnings per share (EPS) of $3.17 was a massive 60.1% above consensus estimates of $1.98. The strong results were driven by higher-than-expected collections, which also led to a significant improvement in profitability. Encore's pre-tax profit margin for the quarter was 21.7%, a notable increase of 10.6 percentage points compared to the same period last year, signaling greater operational efficiency.

Encore Capital Group is up 5% since the beginning of the year, and at $49.34 per share, it is trading close to its 52-week high of $51.25 from February 2025. Investors who bought $1,000 worth of Encore Capital Group’s shares 5 years ago would now be looking at an investment worth $1,404.

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