Retail Stocks Are Looking A Little Less Positive Than They Did Last Week

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First of all, I want to wish everyone a Happy Thanksgiving. Second, as you probably know, the market will be closed on Thursday for Thanksgiving and only open for half a day on Friday. I’m going to celebrate with my family, so there won’t be a market update on Friday, but I’ll be back on Monday 29.

Equity index futures are pointing to open lower levels on the day with low trading volumes. However, the day is heavy for economic announcements. The Census Bureau issued durable goods orders that came in on expectations, which shows that business continues to grow. US Gross Domestic Product (GDP) confirmed that the economy is growing at 2.1% in the third quarter. However, it was lower than the estimate of 2.2 per cent.

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Inflation is also rising as reported by core PCE prices, which have risen in line with expectations of 4.5%. When accounting for only core items for other products, prices increased 5.3% in the third quarter.

Good news for the job market. Jobless claims came in better than expected and below 200,000, the first time it has reached that level since the pandemic.

Retail inventory recovered a healthy 0.4%, which investors didn’t get with two retailers that reported inventory problems yesterday. After the market closed, Nordstrom (JWN) fell 23% in after-hours trading, outperforming on revenue but missing out on earnings. Additionally, the company said it had high inventories which was raising concerns among investors that the company had missed out on its choice of product trends.

The Gap (GPS) also fell 15.7 per cent in after-hours trading after missing revenue and earnings estimates. The company also lowered its annual earnings forecast due to supply chain and inventory problems ahead of the holiday season.

Several other retail stocks fell on Tuesday, including Abercrombie & Fitch (ANF), which fell 12.59%, Best Buy (BBY) lost 12.31%, Dix Sporting Goods (DKS) 4% and Urban Outfitters. (URBN) declined by 9.31. , While it wasn’t all bad for retailers, Dollar Tree (DLTR) and Burlington (BURL) both climbed 9.17% and 8.57%, respectively, on their earnings reports.

When big box stores were making the announcement last week, the retail stock became the darling of the market. However, investors are now focusing on profit margins and inventory, through which retailers are poised to grow and those ready to struggle. Overall, retailers remain positive as the Dow Jones US Retail Index ($DJUSRT) closed slightly higher on Tuesday.

One non-retail stock that was among the losers was Zoom (ZM). It fell more than 14.71% on concerns that as the pandemic eases, demand for video conferencing will slow. The stock is down more than 50% for the year, with some analysts saying worries are high.

Stocks were mixed on Tuesday as crude oil (/cl) rose 2.28%, despite announcements that the White House was planning to release a record 50 million barrels from the country’s strategic petroleum reserves. According to the new York TimesThe move is in line with Britain, China, India, Japan and South Korea, which are also planning to release reserves. These countries have been trying to pressure OPEC+ to increase their production, but the announcements were quickly rejected.

The S&P Energy Select Sector Index ($IXE) rose 3% on a jump in oil prices. The 10-year Treasury yield (TNX) also rose in response to oil prices, rising another 2.58% from yesterday’s gain of 5.79%. A rise in rates pulled down the tech-heavy Nasdaq (comp: GIDS) which dropped more than 1.1% but closed down 0.5%. Rising yields were good for the S&P Financial Select Sector Index ($IXM), which rose 1.55% in line with rising rates.

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The stock market is struggling once again. The Russell 2000 (RUT), which tracks 2,000 of the smallest publicly traded companies, broke above resistance in November and rose higher. However, the index broke down throughout the month before breaking below the original resistance level. Technical analysts view the inability to sustain breakouts as weakness and a lack of conviction.

Similar weakness can be seen in the New York Stock Exchange (NYSE) advance/decline (A/D) line which moved higher at the same time as the Russell 2000 did but is also retracing its recent move. You may remember that the A/D line measures the number of stocks that are moving or rising on the NYSE and the number of shares that are declining or falling. The rising line is bullish as it indicates that most of the stocks are going up. The falling line is bearish as it signals that most of the stock is going down.

A strong bull market is usually broad-based in which most stocks participate. Strong bullish sentiment is often characterized by risk taking, meaning that declining interest in small-cap stocks suggests that investors are unwilling to take risks on smaller and less-established companies. These developments suggest that sentiment is turning less sharply despite the major indices trading near record highs.

gravy boat: According to the MarketWatch heat map on the Thinkorswim platform, APA (APA), Devon Energy (DVN), Diamondback Energy (FANG), EOG Resources (EOG), Hess (HES), Marathon (MRO), and Occidental Petroleum (OXY) S& Was one of the biggest movers in the P500. These stocks belong to the oil, gas and consumable fuel industry group; While the other energy stocks in the S&P 500 are energy equipment and services. This is because today’s move shows that investors have yet to start drilling new. Falling oil prices may be hard to come by without increasing the supply of oil.

The fall in oil prices stretched these stocks like a rubber band, and today, when oil prices rose, the band was released. These stocks will likely be tied to oil prices, which could mean volatility. If OPEC+ is confident of increasing production or if more oil reserves are released, these stocks could fall if oil prices fall.

Dinner Table Debate: Even though 50 million barrels of oil would be the biggest single draw ever from reserves, it doesn’t amount to much compared to the overall oil market. For example, according to Statista, OPEC+ produces about 30 million barrels per day. Another option offered by some politicians is to keep American oil in the United States by banning exports. Assuming that other countries would not react by refusing to import into the United States, this could help keep oil prices low in the country but hurt allies.

Another option offered by other politicians would be President Biden, who would reverse some executive orders signed in January that greatly reduced access to drilling on federal land and offshore. They argue that increased drilling could provide a long-term solution to oil supply issues.

Family Reunion: Looking at some energy futures prices, heating oil (/HO) also jumped on Tuesday, rising 2.51%, natural gas futures (/NG) up 4.64%, and RBOB gasoline futures (/RB) up 2.98%. While there is a risk of earning too much from day trading, these are all areas that directly affect consumers. Low-income Americans will feel these changes in a big way, and regions already facing energy crises, such as Europe, could get worse. If you don’t fall into these groups, you may have another reason to be grateful this week.

TD Ameritrade® Commentary for educational purposes only. Member SIPC.

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