What Happened?
A number of stocks fell in the afternoon session after a confluence of negative economic data pointed to a weak economy. The latest Survey of Consumer Expectations from the New York Fed revealed that households' short-term inflation expectations are rising, while their outlook on the labor market is deteriorating. Consumers expressed greater concern about potential job losses and expect lower earnings growth, factors that directly impact discretionary spending.
Adding to the unease, Chief Economist at Moody's Analytics, Mark Zandi, warned that 22 states are already showing clear signs of a recession, placing the broader U.S. economy in a precarious position. The ongoing U.S. government shutdown further dampens sentiment, threatening to weigh on incomes and purchasing power.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Vehicle Retailer company CarMax (NYSE:KMX) fell 3.5%. Is now the time to buy CarMax? Access our full analysis report here, it’s free for active Edge members.
- Department Store company Kohl's (NYSE:KSS) fell 2.8%. Is now the time to buy Kohl's? Access our full analysis report here, it’s free for active Edge members.
- Department Store company Macy's (NYSE:M) fell 2.6%. Is now the time to buy Macy's? Access our full analysis report here, it’s free for active Edge members.
- Home Furniture Retailer company Sleep Number (NASDAQ:SNBR) fell 3.8%. Is now the time to buy Sleep Number? Access our full analysis report here, it’s free for active Edge members.
- Boat & Marine Retailer company MarineMax (NYSE:HZO) fell 3.2%. Is now the time to buy MarineMax? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Sleep Number (SNBR)
Sleep Number’s shares are extremely volatile and have had 84 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 21 days ago when the stock dropped 3.1% on the news that new government data showed a decline in consumer spending on furniture, signaling sector-specific weakness.
Although overall U.S. retail sales surpassed expectations with a 0.6% rise in August, the report revealed cautious consumer behavior in certain areas. Specifically, furniture store sales experienced a 0.3% drop from July, suggesting a selective pullback in discretionary spending on big-ticket items. This trend aligns with broader reports indicating that businesses providing non-essential goods are under stress. As the cost of essentials continues to rise, households are limiting discretionary spending, which directly impacts companies like Sleep Number.
Sleep Number is down 57.7% since the beginning of the year, and at $6.32 per share, it is trading 69% below its 52-week high of $20.41 from December 2024. Investors who bought $1,000 worth of Sleep Number’s shares 5 years ago would now be looking at an investment worth $119.20.
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