What Happened:

Shares of ride sharing service Lyft (NASDAQ: LYFT) fell 5.2% in the morning session after the major indices pulled back with the Nasdaq down 1.1%, while the Dow and S&P 500 fell 0.9% and 0.8% respectively. Bond yields increased as traders lowered expectations that the Federal Reserve would cut interest rates in June 2024. 

Also, it's likely investors are taking profits to wrap up the earnings season. Macro data remained mixed with the PCE (personal consumption expenditure - the Fed's favourite inflation gauge) price index coming in inline with market's expectations at 2.5% for the month of February 2024 as reported on March 29, 2024. The data showed that inflation remained sticky. With inflation yet to come back down to the Fed's 2% target, the data is likely to raise renewed skittishness about the Fed's pace of rate cuts in 2024. 

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Lyft? Access our full analysis report here, it's free.

What is the market telling us:

Lyft's shares are quite volatile and over the last year have had 49 moves greater than 5%. In context of that, today's move is indicating 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 13 days ago, when the company gained 5.4% as major indices rose, with the S&P 500 up 0.8% while the Nasdaq gained 1.2%, as the Federal Open Market Committee left the policy rate unchanged at 5.25-5.50% during its March 2024 meeting. In addition, the committee guided three rate cuts in 2024, in line with its previous projections and market expectations. However, the Committee continued to highlight the focus on getting inflation back down to the 2% target. Ahead of the meeting, markets were worried that recent inflation data would push the Fed to keep rates higher for longer, potentially resulting in fewer rate cuts in 2024. 

Notably, the Bureau of Labour Statistics reported that the CPI (Consumer Price Index - a gauge of average price consumers pay for goods and services) for the month of February 2024 came in slightly hotter than expected at 3.2% year on year (vs. Consensus for 3.1%), mostly due to increases in gasoline and shelter prices. 

Lyft is up 34.6% since the beginning of the year, and at $18.55 per share it is trading close to its 52-week high of $20.28 from March 2024. Investors who bought $1,000 worth of Lyft's shares 5 years ago would now be looking at an investment worth $269.39.

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