Hot Stocks: EV stocks fall; LEN, NVR hit lows; AYI falls on earnings; SST soars

Worries about an even more hawkish Federal Reserve sent stocks sharply lower on Tuesday, led by a 2.4% drop in the Nasdaq. The S&P 500 declined 1.3%.

The decline included a notable retreat in the electric vehicle stock, as less-established names suffered in the wake of an EV partnership between General Motors (GM) and Honda (HMC). Rivian Automotive (RIVN), Lordstown Motors (RIDE) and Faraday Future Intelligent Electric (FFIE) all finished lower.

Homebuilders also retreated during the session, hurt by concerns that a tighter Fed would constrict the housing market. As part of this, Lennar (NYSE:LEN) and NVR (NYSE:NVR) fell to new 52-week lows.

Acuity Brands (AYI) was another standout decliner on the session. Shares fell amid worries about narrowing margins.

Looking to some of the day’s standout gainers, Black Knight (BKI) jumped on reports the company is considering a sale. Meanwhile, System1 (SST) rallied on earnings news.

Sector In Focus

Electric vehicle stocks were among the notable casualties in Tuesday’s overall sell-off. This was intensified by a partnership between General Motors (GM) and Honda (HMC), which could limit the market for smaller EV players.

GM and HMC said they were working together as part of a long-term partnership aimed at creating lower-cost EVs. The firms are targeting vehicles with a price point below $30,000.

Looking at broader industry dynamics, signs that the Fed would likely speed up its tightening of monetary policy sparked worries about valuations for potential growth companies that have yet to establish solid bottom-line performance. At the same time, ongoing worries about inflation and component shortages continue to weigh on the sector.

Rivian Automotive (RIVN) was among the big names to suffer a decline on the session, dropping by more than 9%. Lordstown Motors (RIDE) and Faraday Future Intelligent Electric (FFIE) both fell about 8%.

Standout Gainer

Speculation about a possible takeover offer sent Black Knight (BKI) sharply higher. Shares of the mortgage lending software and analytics firm climbed nearly 12% after Bloomberg reported the firm’s interest in a sale.

According to the report, private equity firms have expressed interest in a transaction, although BKI hasn’t made a final decision about whether to go forward with a sale.

BKI showed a loss through much of the session but skyrocketed in the afternoon as reports of a potential sale broke. The stock eventually finished at $66.27, a gain of $7 on the day.

Standout Loser

Despite beating expectations on the headline numbers, Acuity Brands (AYI) dropped in the wake of its latest earnings report, as inflation pressures compressed margins. Shares fell 8%.

The lighting and building management company beat expectations on both its top and bottom lines. This included revenue that rose 17% from last year to reach $909M — exceeding analyst’s consensus by nearly $23M.

However, the company’s gross margin fell to 41.7%. Higher material and freight costs more than offset AYI’s price increases.

AYI retreated $14.93 to finish at $170.12. The stock remains off a 52-week low of $159.57 but has come well off its 52-week high of $224.59.

Notable New High

A blockbuster earnings report sparked a wave of buying in shares of marketing research firm System1 (SST). Shares rose 23% on the session to reach their highest level since coming public in a SPAC deal early this year.

The company reported Q4 net income that more than quadrupled from the previous year, with adjusted EBITDA climbing 65%. Revenue advanced 48% to reach $239M.

SST raised its forecast for 2022, saying it now sees full-year revenue of $1B. Adjusted EBITDA is expected to come in at $174M, which would represent an increase of 37% from the previous year.

Based on the earnings news, SST surged in the early stages of Tuesday’s session, reaching a level of $37.10 — its highest mark since coming public in a SPAC deal in January and a rally of nearly 125% from Thursday’s close.

Shares gave up a large chunk of those gains through the rest of the session. Still, SST closed at $20.31, a gain of $3.80 on the session.

Notable New Low

Homebuilders have seen a downdraft lately. Amid worries that rising interest rates will make it more difficult for buyers to get financing, the sector has suffered a significant downdraft in 2022.

This retreat continued on Tuesday, with Lennar (LEN) and NVR (NVR) among the big names in the industry showing weakness. The latest slides took the stocks to a new 52-week low.

Tuesday’s selling took place amid comments from Federal Reserve Governor Lael Brainard, who predicted a rapid reduction in the central bank’s balance sheet. This would involve selling assets, like mortgage-backed securities, that the Fed acquired as part of its effort to boost the economy during the pandemic.

Investors feared that removing this stimulus to the housing market might lead to slowing growth.

Based on these concerns, LEN dropped $3.45 to close at $78.87. During the session, the stock also reached an intraday 52-week low of $78.54.

LEN hit a 52-week high of $117.54 in late 2021. Shares are now down about 33% from that peak.

Meanwhile, NVR retreated $156.92 to finish at $4,390.86, a slide of more than 3% on the session. The stock also set an intraday 52-week low of $4,378.28.

From a 52-week high of $5,982.44 in December, shares have retreated almost 27%.

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