Why Did Circle Internet Stock (CRCL) Skyrocket Today?

Key Points

• The last data points the Federal Reserve will consider before making its decision next week were released today.

• Inflation was hotter than expected, but so was unemployment.

• Markets are now fairly certain that the Federal Reserve will lower rates.

• 10 stocks we like better than Circle Internet Group ›

Shares of Circle Internet (NYSE: CRCL) jumped on Thursday, finishing the day up 17.8%. The rise came as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 0.8% and 0.7%, respectively.

The latest Consumer Price Index (CPI) data was released this morning, showing inflation rose more than expected in August. The report was overshadowed, however, by weekly unemployment numbers not seen in nearly four years.

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Rate cuts look likely

The Federal Reserve just got its final piece of data before next week's rate decision, and the numbers tell a conflicting story. August's CPI came in hotter than expected, but the Labor Department released its weekly report, showing jobless claims ticked up significantly more than economists expected, hitting their highest level since October 2021.

This puts Fed chair Powell in a challenging position, with data pointing in both directions. However, it appears likely at this point that the Fed will treat employment as the primary issue and cut rates.

Image source: Getty Images.

Lower rates tend to spur investment in riskier assets like crypto and growth stocks. That meant Circle stock saw a significant boost as investors anticipated that crypto would benefit from lower rates.

Circle's valuation is high

Though Circle's stock has fallen nearly 50% from its peak shortly following its IPO in June, shares of the stablecoin provider still seem pricey to me. Though I believe the stablecoin market will grow significantly, I still think too much growth is priced in already. Circle's forward price-to-earnings ratio (P/E) is more than 120.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.