What Happened?
Shares of aI-powered lending platform Upstart (NASDAQ:UPST) jumped 8.1% in the afternoon session after stocks rebounded to start the session amid continued market volatility and moved slightly higher after the Federal Open Market Committee kept rates at 4.25% to 4.50% in its March 2025 meeting. The Jerome Powell-led committee also hinted at two more rate cuts for the year, saying, "Uncertainty around the economy has grown."
The good news is that holding rates steady and signaling two additional cuts this year means no surprises (the market dislikes surprises). The bad news is that the Fed reduced its outlook growth to 1.7%, down from the previous projection of 2.1% in December. At the same time, the inflation outlook was raised to a 2.8% annual increase for core prices, up from the prior projection of 2.5%. This suggests the Fed sees the macro tilting towards a stagflation scenario, where inflation rises as economic growth slows.
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What The Market Is Telling Us
Upstart’s shares are extremely volatile and have had 70 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 7 days ago when the stock gained 7.5% as markets experienced a boost after data from the Bureau of Labor Statistics revealed that inflation for the month of February 2025 came in better than expected. The CPI rose 0.2% from the previous month (vs estimates for a 0.3% increase), while headline inflation rose 2.8% year on year (vs estimates for a 2.9% y/y increase). The data revealed inflation continued to edge closer to the Fed's 2% target, but not quite there yet. The reaction wasn't anything wild, but the sentiment leaned positive. The Nasdaq led the way, climbing 1.4%, boosting some tech stocks.
Upstart is down 17.1% since the beginning of the year, and at $50.21 per share, it is trading 43.4% below its 52-week high of $88.77 from February 2025. Investors who bought $1,000 worth of Upstart’s shares at the IPO in December 2020 would now be looking at an investment worth $1,710.
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