What Happened?

A number of stocks jumped in the afternoon session after markets continued to rally amid growing investor optimism for a Federal Reserve interest rate cut in September. This optimism was spurred by a recent Consumer Price Index (CPI) report that did not show runaway inflation, increasing the perceived probability of a rate cut to over 90%. Lower interest rates are generally seen as a positive for the economy as they reduce borrowing costs for consumers, which can stimulate spending on non-essential goods. Consequently, investors bid up shares in the apparel, home furnishings, and automotive retail industries in anticipation of stronger consumer demand.

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:

• Apparel Retailer company Lululemon (NASDAQ: LULU) jumped 3.6%. Is now the time to buy Lululemon? Access our full analysis report here, it’s free.
• Apparel Retailer company Gap (NYSE: GAP) jumped 3.6%. Is now the time to buy Gap? Access our full analysis report here, it’s free.
• Auto Parts Retailer company Advance Auto Parts (NYSE: AAP) jumped 4.4%. Is now the time to buy Advance Auto Parts? Access our full analysis report here, it’s free.
• Vehicle Retailer company Lithia (NYSE: LAD) jumped 4%. Is now the time to buy Lithia? Access our full analysis report here, it’s free.
• Department Store company Macy's (NYSE: M) jumped 3.6%. Is now the time to buy Macy's? Access our full analysis report here, it’s free.

Zooming In On Advance Auto Parts (AAP)

Advance Auto Parts’s shares are extremely volatile and have had 35 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 about 1 month ago when the stock dropped 3% amid a broader market downturn as former President Trump announced potential 30% tariffs on goods from the European Union and Mexico. The announcement has sparked concerns of a renewed trade war, leading to widespread investor anxiety and a sell-off in the broader market. For a retailer like Advance Auto Parts, which sources products through a global supply chain, the prospect of new tariffs is particularly concerning. Tariffs, which are taxes on imported goods, can lead to higher costs for the company. These increased costs could either be absorbed, squeezing profit margins, or passed on to consumers through higher prices, which could potentially dampen demand for its products. The uncertainty surrounding future trade policies is weighing on investor sentiment for companies with significant international supply chains.

Advance Auto Parts is up 28.4% since the beginning of the year, and at $61.81 per share, it is trading close to its 52-week high of $66.50 from July 2025. Investors who bought $1,000 worth of Advance Auto Parts’s shares 5 years ago would now be looking at an investment worth $396.24.

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