Retail sings the blues, Tuesday stocks stuck in the red zone

Bricks-and-mortar retail iffiness apparently enough to halt Monday’s irrational exuberance. No clear direction for this week’s trades.

Exterior of a Dick's Sporting Goods store in Connecticut. (Image via Wikipedia entry on Dick's, CC 2.0 license.

WASHINGTON, August 15, 2017 – When it’s not promoting asinine anti-Trump stories on its Internet front page, CNBC’s #NeverTrump-centric website reports some actual financial news, as in its current posting detailing the probable reason behind Tuesday’s iffy trading action in stocks:

“Retail stocks fell sharply on Tuesday, capping gains in the broader market.”

We get the details, too, as of approximately 10 a.m. ET:

“The SPDR S&P Retail ETF (XRT) fell 2.3 percent, with shares of Advance Auto Parts [AAP] on pace for its worst day ever after posting weaker-than-expected earnings. Dick’s Sporting Goods [DKS] also took a hit, shedding 20 percent after the company’s results missed the mark. The company also revised lower its 2017 outlook.

“‘Dick’s Sporting Goods revising its forecast down is very bad, especially for a company in an area thought to be “Amazon proof,”’ said Kim Forrest, senior equity analyst at Fort Pitt Capital. ‘I think the negative sentiment is spilling over across the retail sector.’

“Dow component Home Depot posted better-than-expected earnings and sales for the previous quarter, but its stock still fell 3 percent. Shares of Amazon, meanwhile, traded marginally higher.

“The broader stock market, however, traded marginally lower. The Dow Jones industrial average fell just 10 points, with Home Depot contributing the most losses. The S&P 500 traded 0.1 percent lower, with and telecommunications lagging. The Nasdaq composite also fell 0.1 percent.”

As hinted at in Kim Forrest’s comment above, Amazon’s announced on-line entry, via Sears-Kenmore, into the retail appliance market initially drove a stake into the collective heart of America’s Internet-weakened bricks-and-mortar retail sector.

Read also: Trading Diary: Investors dying of boredom in Tuesday markets

There have been bits and pieces of retail stock recovery lately, notably in Dollar Tree (DLTR) and Home Depot (HD). But, as noted, traders rewarded HD for its superior numbers this morning by creaming the stock once it opened for trading. This is more than likely the usual “sell on good news” reflex, however, and HD is likely to recover its recent gains fairly quickly. At least we hope so, since we have modest positions in this hardware giant as well as in cut-rate Dollar Tree.

The latter, which doesn’t compete directly against Amazon’s latest retail moves in appliances, is being somewhat affected by its slow incorporation of the lagging Family Dollar chain’s stores. But the digestive phase of its Family Dollar acquisition should be remedied over the next quarter or two, which will allow it to more rapidly increase its profitability and market share.

The retail stock swoon is probably overdone, although the Amazon-Sears move may signal the eventual downfall of the Sears-K-Mart (SHLD) empire (or what’s left of it), as well as the fortunes of JC Penney (JCP) and Macy’s (M) to name a few. On the other hand, it may not affect big appliance retailers like Home Depot, Lowes (LOW) and Best Buy (BBY) as much as overly-spooked analysts think. After all, all three companies sell a lot more than just big appliances.

Nonetheless, stocks have backed off from Monday’s “Happy Days Are Here Again” mode today, and, as of 2 p.m. ET, all three major averages are marginally down. It’s turning out to be a “Meh” type of days. We’ll move on with our lives and see if we can’t accomplish something more tangible on Wednesday.


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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17