Rocket Companies (RKT) Stock Is Up, What You Need To Know

What Happened?

Shares of fintech mortgage provider Rocket Companies (NYSE:RKT) jumped 5% in the morning session after Bank of America Securities upgraded the stock, citing benefits from easing mortgage rates. 

The bank's analyst, Mihir Bhatia, raised Rocket Companies to a 'Buy' from 'Neutral' and increased the price forecast to $24 from $21. The upgrade is based on the expectation that Rocket will benefit from higher purchase and refinancing volumes as mortgage rates fall. This positive outlook is supported by broader market trends, with average 30-year fixed mortgage rates dropping to 11-month lows, reaching levels around 6.25% to 6.5%. The decline in rates has already spurred a rebound in the U.S. housing market, with the Mortgage Bankers Association reporting a 9.2% jump in mortgage applications for the week ending September 5, marking the strongest week for homebuyer activity since 2022.

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What Is The Market Telling Us

Rocket Companies’s shares are extremely volatile and have had 39 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 about 23 hours ago when the stock gained 3% on the news that an unexpected decline in wholesale inflation reinforced bets that the Federal Reserve will cut interest rates. The Producer Price Index (PPI), a measure of inflation at the wholesale level, unexpectedly ticked 0.1% lower in August, contrary to economists' estimates of an increase. This report has soothed concerns that persistent inflation would prevent the central bank from lowering its key interest rate. Following the data, traders are now almost fully pricing in multiple rate reductions in 2025. The prospect of lower rates from the Fed generally leads to lower mortgage rates, which is a significant catalyst for the housing market as it makes financing a home purchase more affordable for consumers.

Rocket Companies is up 105% since the beginning of the year, and at $22.25 per share, has set a new 52-week high. Investors who bought $1,000 worth of Rocket Companies’s shares 5 years ago would now be looking at an investment worth $977.80.

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