What Happened?

A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official bolstered hopes for an interest rate cut. 

New York Federal Reserve President John Williams stated he sees “room for a further adjustment” in the near term, sparking a significant market rally. Following his remarks, the probability of the central bank cutting rates at its December meeting jumped from 39% to over 73%, according to the CME FedWatch tool. This positive sentiment provided relief to markets amid concerns over high valuations, particularly in AI-related stocks.

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 Kontoor Brands (NYSE: KTB) jumped 2.9%. Is now the time to buy Kontoor Brands? Access our full analysis report here, it’s free for active Edge members.
• Apparel and Accessories company Under Armour (NYSE: UAA) jumped 2.9%. Is now the time to buy Under Armour? Access our full analysis report here, it’s free for active Edge members.
• Specialized Consumer Services company LKQ (NASDAQ: LKQ) jumped 3%. Is now the time to buy LKQ? Access our full analysis report here, it’s free for active Edge members.

Zooming In On LKQ (LKQ)

LKQ’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 22 days ago when the stock gained 6.2% on the news that it reported third-quarter profits that significantly beat Wall Street's expectations, overshadowing a slight revenue miss and a cut to its full-year guidance. The vehicle components provider posted adjusted earnings of 84 cents per share, which was well ahead of the average analyst estimate of 76 cents. Revenue for the period came in at $3.50 billion, just missing the $3.53 billion consensus. Despite management lowering its full-year adjusted profit guidance to a midpoint of $3.08 per share, investors appeared to focus on the strong bottom-line outperformance in the quarter. The 11% earnings beat demonstrated better-than-expected profitability, which was enough to send the shares higher even with the mixed overall report.

LKQ is down 18.4% since the beginning of the year, and at $29.58 per share, it is trading 32.9% below its 52-week high of $44.05 from March 2025. Investors who bought $1,000 worth of LKQ’s shares 5 years ago would now be looking at an investment worth $824.97.

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