Shares of Advance Auto Parts (NYSE: AAP), O'Reilly Automotive (NASDAQ: ORLY), and LKQ (NASDAQ: LKQ), a group of auto parts retailers, all spiked over 10% Wednesday as broader markets logged a second
Shares of Advance Auto Parts (NYSE: AAP), O'Reilly Automotive (NASDAQ: ORLY), and LKQ (NASDAQ: LKQ), a group of auto parts retailers, all spiked over 10% Wednesday as broader markets logged a second day of strong gains thanks to a huge $2 trillion stimulus deal. But are these retailers poised to continue rebounding?
The deal calls for a range of aid, including $1,200 government checks to many Americans (read here to know if you'll receive a check) and hundreds of billions of dollars to battle the COVID-19 coronavirus pandemic and its negative effects. The stimulus agreement set the stage for the S&P 500 and Dow to log solid gains throughout most of Wednesday, adding to Tuesday's surge, before giving back some gains near the end of the trading session.
Rebounding stocks included a group of auto parts retailers. They are a part of the broader automotive industry that has been brutally sold off thanks to plants shutting down, less discretionary miles traveled, and a likely big decline in global vehicle sales as uncertainty makes consumers a little more cautious about big-ticket purchases. More specifically, fewer Americans on the road thanks to social distancing and/or quarantining means less demand for a supplier such as LKQ, which sells parts to collision shops and mechanics. AutoZone (NYSE: AZO) noted in its recent quarterly report that COVID-19 could negatively affect not only demand for its products, but also store hours and workforce availability. And it could magnify the risks with its global sourcing of merchandise, not a good recipe for investors or businesses.