What Happened?

A number of stocks fell in the afternoon session after the Dow Jones Industrial Average fell as much as 0.7%, reflecting lingering uncertainty, and capping off a volatile week which saw stocks enjoy some relief as President Donald Trump reduced tensions with European allies by backing off his threat of imposing new tariffs. 

Threats of tariffs initially created uncertainty for businesses, as they can lead to higher costs for multinational corporations and disrupt global supply chains. By withdrawing the threat, the administration removed a significant headwind for the market, prompting a relief rally. This development was a key factor in helping major indexes recover from earlier losses, even as some analysts noted that underlying geopolitical risks and market volatility remain concerns for investors.

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:

• Vehicle Retailer company Lithia (NYSE: LAD) fell 4.2%. Is now the time to buy Lithia? Access our full analysis report here, it’s free.
• Apparel Retailer company American Eagle (NYSE: AEO) fell 3.2%. Is now the time to buy American Eagle? Access our full analysis report here, it’s free.
• Apparel Retailer company Urban Outfitters (NASDAQ: URBN) fell 3.1%. Is now the time to buy Urban Outfitters? Access our full analysis report here, it’s free.
• Home Furniture Retailer company Arhaus (NASDAQ: ARHS) fell 3.9%. Is now the time to buy Arhaus? Access our full analysis report here, it’s free.
• Home Furniture Retailer company Williams-Sonoma (NYSE: WSM) fell 2.9%. Is now the time to buy Williams-Sonoma? Access our full analysis report here, it’s free.

Zooming In On Lithia (LAD)

Lithia’s shares are somewhat volatile and have had 13 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 biggest move we wrote about over the last year was 4 months ago when the stock dropped 6.1% on the news that investor sentiment soured on the used-car retail sector as competitor CarMax reported weak second-quarter results that missed expectations. 

CarMax, a major industry player, announced that its profit and sales for the quarter ending August 31 fell short of analyst forecasts. The company's used-car sales dipped 7.2% to $5.271 billion, and same-store sales dropped by 6.3%. CarMax's earnings per share came in at 64 cents, significantly below the expected $1.04. The poor performance from a key competitor raised concerns about challenging market conditions for the entire used-car industry, weighing on shares of peer companies. Separately, it was reported that Lithia sold its BMW Portland dealership to Swickard Auto Group.

Lithia is down 3.3% since the beginning of the year, and at $321.25 per share, it is trading 16.7% below its 52-week high of $385.71 from February 2025. Investors who bought $1,000 worth of Lithia’s shares 5 years ago would now be looking at an investment worth $947.19.

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