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 LGI Homes (NASDAQ: LGIH) fell 6.7%. Is now the time to buy LGI Homes? Access our full analysis report here, it’s free for active Edge members.
- Electrical Systems company LSI (NASDAQ: LYTS) fell 3.7%. Is now the time to buy LSI? Access our full analysis report here, it’s free for active Edge members.
- Maintenance and Repair Distributors company WESCO (NYSE: WCC) fell 2.8%. Is now the time to buy WESCO? Access our full analysis report here, it’s free for active Edge members.
- Infrastructure Distributors company DistributionNOW (NYSE: DNOW) fell 3.8%. Is now the time to buy DistributionNOW? Access our full analysis report here, it’s free for active Edge members.
- Infrastructure Distributors company MRC Global (NYSE: MRC) fell 3.4%. Is now the time to buy MRC Global? Access our full analysis report here, it’s free for active Edge members.
Zooming In On LGI Homes (LGIH)
LGI Homes’s shares are very volatile and have had 25 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 28 days ago when the stock dropped 3.9% on the news that the company received a reiterated "neutral" rating from Wedbush, highlighting recent negative sentiment from other analysts.
The report from Wedbush follows a previous action by JPMorgan Chase & Co., which had lowered its price objective on LGI Homes to $47.00 from $52.00 and assigned an "underweight" rating. This cautious analyst sentiment is underscored by the company's recent performance, as its revenue for the last reported quarter was down 19.8% on a year-over-year basis. Broader market trends may also be weighing on the stock, as the national housing market has begun to show signs of shifting toward more buyer-friendly conditions, potentially adding pressure on homebuilders.
LGI Homes is down 46.2% since the beginning of the year, and at $46.78 per share, it is trading 59.7% below its 52-week high of $116.19 from October 2024. Investors who bought $1,000 worth of LGI Homes’s shares 5 years ago would now be looking at an investment worth $383.34.
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