Why MGM Resorts (MGM) Stock Is Trading Up Today

What Happened?

Shares of hospitality and casino entertainment company MGM Resorts (NYSE:MGM) jumped 4.8% in the afternoon session after Federal Reserve Chair Jerome Powell hinted that interest rate cuts could be on the horizon. The positive sentiment spread across Wall Street, with the Dow Jones Industrial Average soaring over 900 points on hopes that the U.S. Federal Reserve may cut interest rates. The potential for lower rates often encourages consumer spending, which benefits travel and entertainment companies. This trend was seen across the sector, with peers like Caesars Entertainment also rising 6.3%, and travel companies such as Norwegian Cruise Line and Delta Air Lines experiencing significant gains as investors anticipated increased household spending on leisure activities.

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What Is The Market Telling Us

MGM Resorts’s shares are not very volatile and have only had 9 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 previous big move we wrote about was 10 days ago when the stock gained 3.2% on the news that the latest Consumer Price Index (CPI) report showed inflation holding steady, bolstering investor optimism for a potential interest rate cut by the Federal Reserve. The data, which revealed that inflation remained at 2.7% for the year ending in July, was seen as a positive sign by investors. This stability increases the likelihood that the Federal Reserve might lower interest rates at its upcoming September meeting. 

Lower interest rates can stimulate the economy by making borrowing cheaper for both consumers and businesses, which often translates into higher consumer spending. This is particularly beneficial for the Consumer Discretionary sector, which includes companies selling non-essential goods and services like apparel, travel, and electronics.

MGM Resorts is up 13.1% since the beginning of the year, but at $38.09 per share, it is still trading 9.3% below its 52-week high of $41.99 from October 2024. Investors who bought $1,000 worth of MGM Resorts’s shares 5 years ago would now be looking at an investment worth $1,710.

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