What Happened?

A number of stocks fell in the afternoon session after Federal Reserve Chair Jerome Powell signaled a cautious stance on future monetary policy decisions during a speech in Chicago, emphasizing that trade tariffs could add upward pressure to inflation in the short term and complicate the Fed's efforts to stabilize the economy. He warned that such trade measures are "likely to move us further away from our goals," referring to the Fed's dual mandate of price stability and maximum employment. 

The comments did little to improve sentiment, as major indices were already in the negative territory in the morning session after Nvidia announced it might be unable to sell some high-end chips (including the H20 chips) to China due to export controls and requirements from the Trump administration. As a result, the company planned to take a $5.5 billion charge due to inventory writedowns and canceled sales. Adding to the sector's pressure, chip tool maker ASML posted weak bookings (a key demand indicator) which fell below Wall Street's expectations, noting that tariffs had made the industry's outlook more uncertain. 

Taken together, these updates likely fueled investor anxiety, amplifying concerns about global trade tensions, tech sector vulnerability, and the Fed's limited room to maneuver in an increasingly uncertain macro environment.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, following stocks were impacted:

• Engineered Components and Systems company Applied Industrial (NYSE:AIT) fell 6.3%. Is now the time to buy Applied Industrial? Access our full analysis report here, it’s free.
• Agricultural Machinery company AGCO (NYSE:AGCO) fell 5.9%. Is now the time to buy AGCO? Access our full analysis report here, it’s free.
• Home Construction Materials company Quanex (NYSE:NX) fell 6.2%. Is now the time to buy Quanex? Access our full analysis report here, it’s free.
• Automobile Manufacturing company Lucid (NASDAQ:LCID) fell 6.7%. Is now the time to buy Lucid? Access our full analysis report here, it’s free.
• Ground Transportation company RXO (NYSE:RXO) fell 6.1%. Is now the time to buy RXO? Access our full analysis report here, it’s free.

Zooming In On Lucid (LCID)

Lucid’s shares are extremely volatile and have had 58 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 29 days ago when the stock gained 13% on the news that Morgan Stanley analyst Adam Jonas upgraded the stock's rating from Sell to Hold, highlighting the "balanced risk/reward." 

The analyst added, "We see emerging scope for Lucid's ability to play a role in the embodied AI theme as an reshored/'friend-shored' manufacturer with access to capital and strategic relationships that uniquely position Lucid to straddle geopolitical hurdles in potentially partnering with both China and the West."

Lucid is down 23.4% since the beginning of the year, and at $2.32 per share, it is trading 45.5% below its 52-week high of $4.26 from August 2024. Investors who bought $1,000 worth of Lucid’s shares at the IPO in September 2020 would now be looking at an investment worth $234.58.

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