What Happened?
A number of stocks fell in the afternoon session after investors grew anxious as the U.S. government shutdown extended into its seventh day, creating widespread uncertainty.
The political stalemate in Washington has tangible consequences for the economy and markets. A key impact is the delay in the release of crucial economic data, including the September jobs report, leaving the Federal Reserve with less information to guide its policy decisions. The shutdown is also causing direct disruptions, with staffing shortages at the Federal Aviation Administration (FAA) leading to widespread delays at major airports. This combination of economic ambiguity and real-world service interruptions has dampened investor confidence across multiple sectors.
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. Also, 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.
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 Builders company KB Home (NYSE: KBH) fell 5.3%. Is now the time to buy KB Home? Access our full analysis report here, it’s free for active Edge members.
- Home Builders company Taylor Morrison Home (NYSE: TMHC) fell 4.7%. Is now the time to buy Taylor Morrison Home? Access our full analysis report here, it’s free for active Edge members.
- Electronic Components company nLIGHT (NASDAQ: LASR) fell 4%. Is now the time to buy nLIGHT? Access our full analysis report here, it’s free for active Edge members.
- Home Builders company Meritage Homes (NYSE: MTH) fell 4.1%. Is now the time to buy Meritage Homes? Access our full analysis report here, it’s free for active Edge members.
- Home Builders company Tri Pointe Homes (NYSE: TPH) fell 4.5%. Is now the time to buy Tri Pointe Homes? Access our full analysis report here, it’s free for active Edge members.
Zooming In On KB Home (KBH)
KB Home’s shares are not very volatile and have only had 8 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 28 days ago when the stock dropped 3.5% on the news that concerns about the health of the U.S. economy grew following a significant downward revision of job market data.
The Labor Department reported that employers added 911,000 fewer jobs from April 2024 through March than initially estimated. These "benchmark revisions" are issued annually to more accurately account for new and defunct businesses. The report detailed that the leisure and hospitality sector added 176,000 fewer jobs, professional and business services 158,000 fewer, and retailers 126,000 fewer. This weaker-than-expected data has fueled investor anxiety, as it suggests businesses may be becoming more reluctant to hire amid economic uncertainty. The numbers issued are preliminary, with final revisions scheduled for February 2026.
JPMorgan Chase CEO Jamie Dimon added that the U.S. economy is "weakening," though he stopped short of predicting a recession. "Whether it's on the way to recession or just weakening, I don't know," he said. Dimon's remarks are closely watched, given his influence as head of one of the nation's largest banks.
KB Home is down 5.5% since the beginning of the year, and at $61.08 per share, it is trading 28.4% below its 52-week high of $85.26 from October 2024. Investors who bought $1,000 worth of KB Home’s shares 5 years ago would now be looking at an investment worth $1,590.
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