The shares of publicly owned automobile dealers have fallen off a cliff in January, indicating perhaps another ominous harbinger for the U.S. economy in 2016.
The stocks of AutoNation (AN) , Group 1 Automotive (GPI) , Penske Automotive (PAG) and Lithia Motors (LAD) began declining sharply in the first week in January. All are trading close to their 52-week lows.
The group bounced higher in trading on Wednesday, possibly in sympathy with the shares of another dealer chain, Sonic Automotive (SAH) , which rebounded nearly 6% amid the day's market decline. The previous day Sonic hit a 52-week low, which can be a buy or a sell signal.
In any event, the growing consensus that 2016 will be a tougher year to sell new vehicles in the U.S. has been a drag on the stock market and the business prospects of automakers, suppliers and their retail dealers. Few indicators better reflect broad economic optimism (or pessimism) than the willingness of consumers to buy a new vehicle, a decision that often entails a multi-year financial commitment.
Yet signals are mixed: The latest consumer confidence survey from the University of Michigan was positive. Gasoline prices and interest rates are low.
At the same time, U.S. growth seems threatened due to lower growth in China. With the U.S. automotive sales expansion in its seventh year -- something that hasn't happened in modern automotive history -- consumers may well decide that their vehicle is in good shape and replacing it isn't a priority. Flat or lower auto sales trigger reduced factory activity, layoffs, lower retail sales and a declining gross domestic product.