Recovery rally at Jack in the Box: Inflation data boosts stock price

The stock price of the fast-food chain Jack in the Box experienced a pleasant rise of 3.5% in the afternoon, after a key inflation measure, the PCE price index, met forecasts. This fueled hopes for continued interest rate cuts by the US Federal Reserve. The PCE index, the Federal Reserve's preferred inflation gauge, showed a slight year-over-year increase in August, but for economists, it was not unexpected. On Wall Street, this report brought relief as it indicates that inflation risks remain limited, giving the Fed more room for a loose monetary policy. Investors see this as a positive signal that the central bank can support the economy without risking uncontrollable inflation. This positive sentiment helped the major indices to recover some of the losses from the past three-day downturn and triggered stock gains across various sectors. After the initial surge, Jack in the Box shares settled at $20.31, representing a 4.7% increase from the previous closing price. Despite such fluctuations, the stock remains highly volatile, with over 39 movements of more than 5% in the past year. The market perceives this development as significant but not fundamentally business-changing, as reflected in today's stock reaction. Just two weeks ago, the stock fell by 1.4% after Stifel reaffirmed its "Hold" rating and expressed concerns due to weak sales in existing stores. Goldman Sachs and Piper Sandler also remained cautious, with the latter even lowering its price target. Immigration policy challenges, a 7.1% sales decline in comparable stores in the third quarter, and the tighter budget of its core clientele put pressure on the chain. Currently, the price stands at $20.31—a drop of 60.6% compared to the 52-week high of $51.52 last November. Investors who invested $1,000 in Jack in the Box five years ago are now facing an investment value of only $251.41. This is an impressive example of how volatile the market can be and the importance of careful stock selection in times of thematic investing. Given the megatrends, examples like Microsoft and Alphabet are seen as long-term growth stories inspired by the rise of artificial intelligence.