What Happened?
A number of stocks fell in the morning session after crude oil prices surged toward $120 a barrel amid escalating geopolitical conflict in the Middle East.
The spike in crude prices follows an intensification of the Iran war, stoking fears of production and shipping disruptions. These concerns rattled global markets. For the consumer discretionary sector, which includes companies that sell non-essential goods and services, the impact is significant. Higher oil prices can lead to a new wave of inflation, squeezing household budgets and reducing the disposable income available for discretionary spending. This threatens to soften consumer demand, creating headwinds for the 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:
- Auto Parts Retailer company Monro (NASDAQ: MNRO) fell 5.5%. Is now the time to buy Monro? Access our full analysis report here, it’s free.
- Home Improvement Retailer company Floor And Decor (NYSE: FND) fell 6%. Is now the time to buy Floor And Decor? Access our full analysis report here, it’s free.
- Home Furniture Retailer company RH (NYSE: RH) fell 6.7%. Is now the time to buy RH? Access our full analysis report here, it’s free.
- Footwear Retailer company Boot Barn (NYSE: BOOT) fell 5.8%. Is now the time to buy Boot Barn? Access our full analysis report here, it’s free.
- Footwear Retailer company Shoe Carnival (NASDAQ: SCVL) fell 6.1%. Is now the time to buy Shoe Carnival? Access our full analysis report here, it’s free.
Zooming In On RH (RH)
RH’s shares are extremely volatile and have had 44 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 24 days ago when the stock gained 5.4% on the news that a softer-than-expected inflation report fueled hopes for interest rate cuts by the Federal Reserve.
The January Consumer Price Index (CPI), a key measure of inflation, rose by 0.2%, which was less than economists had forecast, with the annual rate cooling to 2.4%. This encouraging data increased market expectations for the Fed to begin cutting interest rates as early as June. The news prompted a rally in Treasuries as their yields fell. While the market's reaction was initially described as a "bumpy ride" due to concerns in other sectors, the favorable inflation data ultimately helped calm Wall Street. Lower inflation is a key prerequisite for the central bank to ease its monetary policy, which is generally supportive of stock valuations.
RH is down 30.6% since the beginning of the year, and at $134.23 per share, it is trading 47.9% below its 52-week high of $257.84 from March 2025. Investors who bought $1,000 worth of RH’s shares 5 years ago would now be looking at an investment worth $292.96.
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