What Happened?
A number of stocks fell in the afternoon session after markets faded the Nvidia rally in the morning session, as investors remained uncertain about future rate cuts.
While the trading day began with significant enthusiasm, pushing the Dow Jones Industrial Average up more than 700 points and the Nasdaq Composite up 2.6%, momentum quickly evaporated as the session wore on. The primary catalyst for this sharp reversal was a stronger-than-expected jobs report, which reduced the implied odds of a December interest rate cut to less than 40%. This macroeconomic anxiety overshadowed stellar corporate performance. Nvidia initially surged 5% on blockbuster earnings and CEO Jensen Huang's bullish outlook on "off the charts" demand for Blackwell chips. However, the stock eventually turned negative, acting as a heavy weight that dragged the broader indices into the red. The sell-off partly reflects a deepening caution regarding high-flying tech valuations in a "higher-for-longer" rate environment.
Consequently, investors appeared to rotate capital away from volatile growth sectors and toward defensive staples, evidenced by Walmart's 6% gain following its own earnings beat. Ultimately, the market could not sustain the morning's euphoria, as traders prioritized rate realities over AI potential.
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:
- Specialty Retail company Petco (NASDAQ: WOOF) fell 3.6%. Is now the time to buy Petco? Access our full analysis report here, it’s free for active Edge members.
- Home Furniture Retailer company Sleep Number (NASDAQ: SNBR) fell 4.4%. Is now the time to buy Sleep Number? Access our full analysis report here, it’s free for active Edge members.
- Auto Parts Retailer company Monro (NASDAQ: MNRO) fell 3.3%. Is now the time to buy Monro? Access our full analysis report here, it’s free for active Edge members.
- Boat & Marine Retailer company MarineMax (NYSE: HZO) fell 3.4%. Is now the time to buy MarineMax? Access our full analysis report here, it’s free for active Edge members.
- Apparel Retailer company Abercrombie and Fitch (NYSE: ANF) fell 3.4%. Is now the time to buy Abercrombie and Fitch? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Sleep Number (SNBR)
Sleep Number’s shares are extremely volatile and have had 83 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 15 days ago when the stock dropped 18.8% on the news that the company reported disappointing third-quarter 2025 financial results and lowered its full-year guidance, both of which missed Wall Street's expectations.
Net sales fell by 19.6% year over year to $342.9 million. The company also posted a loss of $1.73 per share, a significant miss compared to analyst projections for a much smaller loss of $0.02 per share. This sales decline was driven by a 20% drop in same-store sales and a reduction in its store count. Compounding the bad news, Sleep Number cut its full-year revenue forecast to approximately $1.4 billion, signaling ongoing pressure on the business.
Sleep Number is down 74.2% since the beginning of the year, and at $3.85 per share, it is trading 81.1% below its 52-week high of $20.41 from December 2024. Investors who bought $1,000 worth of Sleep Number’s shares 5 years ago would now be looking at an investment worth $56.00.
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