What Happened?

A number of stocks fell in the afternoon session after investors took a breather following a record-setting rally, with concerns over the Federal Reserve's next move and a prolonged government shutdown weighing on sentiment. 

The pullback came as the U.S. government shutdown extended into its second week, creating uncertainty in the market. Investors were also closely watching for signals from the Federal Reserve regarding its monetary policy. This combination of factors led to a cautious mood on Wall Street, causing traders to pause and reassess their positions after weeks of significant gains. 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 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:

• Online Travel company Booking (NASDAQ: BKNG) fell 3.9%. Is now the time to buy Booking? Access our full analysis report here, it’s free for active Edge members.
• Gig Economy company Upwork (NASDAQ: UPWK) fell 2.9%. Is now the time to buy Upwork? Access our full analysis report here, it’s free for active Edge members.
• Online Retail company Revolve (NYSE: RVLV) fell 5.7%. Is now the time to buy Revolve? Access our full analysis report here, it’s free for active Edge members.
• Online Travel company Expedia (NASDAQ: EXPE) fell 4.1%. Is now the time to buy Expedia? Access our full analysis report here, it’s free for active Edge members.
• Online Marketplace company Cars.com (NYSE: CARS) fell 4.7%. Is now the time to buy Cars.com? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Revolve (RVLV)

Revolve’s shares are very volatile and have had 27 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 5 days ago when the stock gained 3.1% on the news that the technology sector climbed as an OpenAI share sale catapulted the firm to the world's most valuable startup, bolstering optimism for artificial intelligence. 

The Nasdaq 100 and S&P 500 benchmarks both reached new records, powered by gains in tech giants and AI-related companies like Nvidia, Microsoft, Alphabet, and Broadcom. Investors are increasingly viewing AI as a significant long-term growth driver, a sentiment strong enough to overshadow concerns from a U.S. government shutdown. This continued enthusiasm highlights the market's strong belief in the transformative potential of artificial intelligence, which is propelling major indices to unprecedented heights.

Revolve is down 37.2% since the beginning of the year, and at $21.08 per share, it is trading 45.7% below its 52-week high of $38.80 from November 2024. Investors who bought $1,000 worth of Revolve’s shares 5 years ago would now be looking at an investment worth $1,163.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.