What Happened?

Shares of regional bank Westamerica Bancorporation (NASDAQ: WABC) jumped 2.6% in the afternoon session after comments from a key Federal Reserve official boosted hopes for an interest rate cut. 

New York Federal Reserve President John Williams stated he sees “room for a further adjustment” in the near term, sparking a significant market rally. Following his remarks, the probability of the central bank cutting rates at its December meeting jumped from 39% to over 73%, according to the CME FedWatch tool. This positive sentiment provided relief to markets amid concerns over high valuations, particularly in AI-related stocks.

The shares closed the day at $47.64, up 2.5% from previous close.

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What Is The Market Telling Us

Westamerica Bancorporation’s shares are not very volatile and have only had 2 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 3 months ago when the stock gained 4.1% on the news that the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium. Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.

Westamerica Bancorporation is down 7.6% since the beginning of the year, and at $47.65 per share, it is trading 18.2% below its 52-week high of $58.23 from November 2024. Investors who bought $1,000 worth of Westamerica Bancorporation’s shares 5 years ago would now be looking at an investment worth $825.74.

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