What Happened?

A number of stocks fell in the afternoon session after investors paused a record-setting rally amid uncertainty from the ongoing U.S. government shutdown. 

The S&P 500 and Nasdaq pulled back from all-time highs as the shutdown entered its second week, creating a data vacuum for investors. The political impasse has halted the release of vital economic indicators, including key reports on jobs and inflation. Without this crucial information, it becomes more difficult for the Federal Reserve and market participants to accurately assess the nation's economic health. This uncertainty prompted traders to take profits following a prolonged period of gains. In addition, Jamie Dimon raised concerns about a market correction. He added, “I would give it a higher probability than I think is probably priced in the market and by others, so if the market is pricing in 10%, I would ... say it’s more like 30%.” Dimon's remarks are closely watched given his influence as head of one of the nation's largest banks.

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:

• Home Furnishings company Lovesac (NASDAQ: LOVE) fell 4.6%. Is now the time to buy Lovesac? Access our full analysis report here, it’s free for active Edge members.
• Apparel and Accessories company Carter's (NYSE: CRI) fell 3%. Is now the time to buy Carter's? Access our full analysis report here, it’s free for active Edge members.
• Apparel and Accessories company G-III (NASDAQ: GIII) fell 3.4%. Is now the time to buy G-III? Access our full analysis report here, it’s free for active Edge members.
• Specialized Consumer Services company Mister Car Wash (NASDAQ: MCW) fell 2.9%. Is now the time to buy Mister Car Wash? Access our full analysis report here, it’s free for active Edge members.
• Leisure Facilities company United Parks & Resorts (NYSE: PRKS) fell 2.8%. Is now the time to buy United Parks & Resorts? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Lovesac (LOVE)

Lovesac’s shares are extremely volatile and have had 32 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 9 days ago when the stock dropped 3% on the news that a report revealed that U.S. consumer confidence dropped for a second consecutive month, hitting a five-month low amid worries over inflation and the job market. Market volatility increased as a partisan standoff pushed the federal government closer to a shutdown. If lawmakers fail to reach a spending agreement, a shutdown would begin, furloughing thousands of federal workers. This prospect has weighed on investor sentiment, creating a 'risk-off' mood in the markets as traders brace for potential economic disruption. The political uncertainty adds a layer of caution for investors heading into the final day of the month. 

Adding to the weakness, a key report showed U.S. consumer confidence unexpectedly fell to a five-month low in September. The Conference Board's consumer confidence index slid to 94.2, a steeper drop than analysts had anticipated and its lowest reading since April. This downturn reflects growing pessimism among Americans about inflation and a weakening job market. Consumer confidence is a closely watched economic indicator as it gauges households' willingness to spend. A decline suggests that consumers may pull back on discretionary purchases, such as dining out or shopping for non-essential goods, which could negatively impact the future revenues and profits of companies in these sectors.

Lovesac is down 39% since the beginning of the year, and at $14.60 per share, it is trading 62.2% below its 52-week high of $38.64 from December 2024. Investors who bought $1,000 worth of Lovesac’s shares 5 years ago would now be looking at an investment worth $429.41.

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