What Happened?
A number of stocks fell in the afternoon session after Brent crude surged, erasing the brief oil relief from the previous week as consumer sentiment hit a record low, sparking concerns that shoppers will cut back on non-essential spending.
The University of Michigan's key sentiment index dropped to 48.2 in early May, as consumers feel "buffeted by cost pressures." The survey revealed that about one-third of consumers were worried about high gasoline prices, while another 30% cited tariffs. This erosion of confidence is a worrying sign for the consumer discretionary sector, which includes everything from apparel to travel.
When households feel financially strained, they typically reduce spending on non-essential items first. Goldman Sachs cut its 2026 discretionary cash flow growth forecast from 5.1% to 3.7% as energy spending crowded out consumer budgets.
Consumer discretionary companies sell what people buy after necessities, restaurants, clothing, cars, and entertainment. Gas is the most direct variable: when filling the tank costs more, households have less left for everything else.
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:
- Consumer Discretionary - Specialized Consumer Services company 1-800-FLOWERS (NASDAQ: FLWS) fell 9.8%. Is now the time to buy 1-800-FLOWERS? Access our full analysis report here, it’s free.
- Consumer Discretionary - Footwear company Caleres (NYSE: CAL) fell 11.1%. Is now the time to buy Caleres? Access our full analysis report here, it’s free.
- Consumer Discretionary - Apparel and Accessories company PVH (NYSE: PVH) fell 7.7%. Is now the time to buy PVH? Access our full analysis report here, it’s free.
Zooming In On Caleres (CAL)
Caleres’s shares are extremely volatile and have had 43 moves greater than 5% over the last year. But moves this big are rare even for Caleres and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock dropped 17.6% on the news that the company reported underwhelming first-quarter 2025 results: its revenue, EPS, and EBITDA fell short of Wall Street's estimates.
That miss mainly came from slower sales at both its Famous Footwear stores and other brands, with February being especially soft. The company suspended its full-year outlook, citing market uncertainty, a signal that near-term visibility remained clouded despite pockets of improvement in March and April.
The company also announced plans to cut operating expenses, alongside efforts to diversify sourcing away from China, as it tries to regain control amid shifting consumer habits. Overall, this was a weaker quarter.
Caleres is down 2.1% since the beginning of the year, and at $11.99 per share, it is trading 32.7% below its 52-week high of $17.82 from May 2025. Investors who bought $1,000 worth of Caleres’s shares 5 years ago would now be looking at only $467.88.
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