What Happened?
A number of stocks fell in the afternoon session after Federal Reserve Chair Jerome Powell signaled a cautious stance on future monetary policy decisions during a speech in Chicago, emphasizing that trade tariffs could add upward pressure to inflation in the short term and complicate the Fed's efforts to stabilize the economy. He warned that such trade measures are "likely to move us further away from our goals," referring to the Fed's dual mandate of price stability and maximum employment.
The comments did little to improve sentiment, as major indices were already in the negative territory in the morning session after Nvidia announced it might be unable to sell some high-end chips (including the H20 chips) to China due to export controls and requirements from the Trump administration. As a result, the company planned to take a $5.5 billion charge due to inventory writedowns and canceled sales. Adding to the sector's pressure, chip tool maker ASML posted weak bookings (a key demand indicator) which fell below Wall Street's expectations, noting that tariffs had made the industry's outlook more uncertain.
Taken together, these updates likely fueled investor anxiety, amplifying concerns about global trade tensions, tech sector vulnerability, and the Fed's limited room to maneuver in an increasingly uncertain macro environment.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, following stocks were impacted:
- Online Retail company Carvana (NYSE: CVNA) fell 6.1%. Is now the time to buy Carvana? Access our full analysis report here, it’s free.
- Home Furniture Retailer company RH (NYSE: RH) fell 5.7%. Is now the time to buy RH? Access our full analysis report here, it’s free.
- Traditional Fast Food company Wendy's (NASDAQ: WEN) fell 5.3%. Is now the time to buy Wendy's? Access our full analysis report here, it’s free.
- Household Products company Central Garden & Pet (NASDAQ: CENT) fell 5%. Is now the time to buy Central Garden & Pet? Access our full analysis report here, it’s free.
- Personal Care company e.l.f. Beauty (NYSE: ELF) fell 5.1%. Is now the time to buy e.l.f. Beauty? Access our full analysis report here, it’s free.
Zooming In On Carvana (CVNA)
Carvana’s shares are extremely volatile and have had 51 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 13 days ago when the stock dropped 19.8% on the news that President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10%. Markets reacted negatively to the announcement, reflecting deep concerns among investors about the broader economic implications. The tariffs were likely seen as a significant threat to global trade flows, with the potential to slow economic growth, drive up consumer prices, and spark retaliatory measures.
Wedbush analyst Dan Ives captured the prevailing market anxiety, stating, "We would characterize this slate of tariffs as 'worse than the worst case scenario' the Street was fearing." His comment highlighted how the scope and severity of the tariffs far exceeded Wall Street's expectations, adding a new layer of uncertainty for businesses and investors.
Carvana is up 4.9% since the beginning of the year, but at $209.30 per share, it is still trading 26.6% below its 52-week high of $285.33 from February 2025. Investors who bought $1,000 worth of Carvana’s shares 5 years ago would now be looking at an investment worth $2,939.
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.
