What Happened?
A number of stocks fell in the afternoon session after worries over worsening trade relations with China were triggered by critical comments from President Donald Trump.
The President's comments, stating on social media that China has 'become very hostile,' have injected significant volatility into the broader markets. This has particularly affected the leisure industry, which is highly sensitive to economic sentiment and discretionary spending. Leisure stocks, which include companies in travel, entertainment, and hospitality, rely on consumers feeling confident enough to spend on non-essential goods and services. Trump targeted China's tightening controls on rare earth metals, which are vital components in many technology products from electric vehicles to defense systems. The president's tone and the suggestion of canceling a meeting with President Xi caused a rapid sell-off in the market.
Earlier in the week, China announced new export controls on the critical minerals. Beijing's Commerce Ministry stated that foreign suppliers now need government approval to export products containing certain rare-earth materials. These materials are essential for producing high-tech goods, including computer chips, electric vehicles, and defense technology. Analysts viewed the move as a strategic assertion of China's dominance in the global rare earth supply chain, particularly amid ongoing trade tensions. The prospect of escalating tariffs raises concerns about economic headwinds, which could lead to a slowdown in consumer spending. If consumers tighten their budgets in response to economic uncertainty, discretionary purchases are often the first to be cut, directly impacting the revenues of companies in this sector.
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 and Accessories company Movado (NYSE: MOV) fell 4.8%. Is now the time to buy Movado? Access our full analysis report here, it’s free for active Edge members.
- Broadcasting company Gray Television (NYSE: GTN) fell 4.6%. Is now the time to buy Gray Television? Access our full analysis report here, it’s free for active Edge members.
- Wireless, Cable and Satellite company Sirius XM (NASDAQ: SIRI) fell 4.6%. Is now the time to buy Sirius XM? Access our full analysis report here, it’s free for active Edge members.
- Leisure Facilities company United Parks & Resorts (NYSE: PRKS) fell 4.1%. Is now the time to buy United Parks & Resorts? Access our full analysis report here, it’s free for active Edge members.
- Leisure Products company Malibu Boats (NASDAQ: MBUU) fell 4.4%. Is now the time to buy Malibu Boats? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Movado (MOV)
Movado’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was about 22 hours ago when the stock dropped 4.4% on the news that investors paused a record-setting rally amid uncertainty from the ongoing U.S. government shutdown.
The S&P 500 and Nasdaq pulled back from all-time highs as the shutdown entered its second week, creating a data vacuum for investors. The political impasse has halted the release of vital economic indicators, including key reports on jobs and inflation. Without this crucial information, it becomes more difficult for the Federal Reserve and market participants to accurately assess the nation's economic health. This uncertainty prompted traders to take profits following a prolonged period of gains.
In addition, Jamie Dimon raised concerns about a market correction. He added, “I would give it a higher probability than I think is probably priced in the market and by others, so if the market is pricing in 10%, I would ... say it’s more like 30%.” Dimon's remarks are closely watched given his influence as head of one of the nation's largest banks.
Movado is down 11.4% since the beginning of the year, and at $17.33 per share, it is trading 18.7% below its 52-week high of $21.31 from December 2024. Investors who bought $1,000 worth of Movado’s shares 5 years ago would now be looking at an investment worth $1,594.
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