The hope among some in the Wall Street crowd was that today’s earnings reports from retailers such as Target (TGT) and Kohl’s (KSS) –and especially guidance for the Christmas shopping quarter to come–would end the plunge in the U.S. stock market for at least a day.
Those dancing sugar plums turned to coal, however, as both Target and Kohl’s disappointed in their third quarter reports. On the news Target shares fell 10.52% and Kohl’s closed 9.23% lower. The Retail Select Sector SPDR ETF (XRT) dropped 3.38% on the day. The news played right into some of the market’s worst fears. For example, while Target did miss analyst earnings estimates–at $1.09 a share rather than $1.12 as Wall Street had projected–the big damage was caused by slipping gross margins as the company’s efforts to compete with Amazon and Wall-Mart on free or less-expensive shipping drove costs higher. That took some of the edge off the company’s good news–digital traffic climbed climbed 49% in the quarter. Higher volumes with lower profits are a mixed blessing, the market said today.
The drop in the retail sector SPDR was worse than the results for any of the major U.S. stock indexes. For the day the Standard & Poor’s 500 stock index was down 1.82% and the Dow Jones Industrial Average lost 2.21%. The NASDAQ Composite was lower by 1.70% and the small cap Russell 2000 index was off 1.84%.
I wouldn’t write home to Grandma yet–besides you’ll see her for Thanksgiving dinner right?–but it is worth noting that the technology heavy NASDAQ while still on the losing side of the ledger outperformed both the S&P 500 and Dow Industrials.
Some of the biggest losers in the tech sector recently were down only modest amounts today with Amazon (AMZN), for example, falling just 1.11% on the day and other recent tech losers actually showed up in the green on the session. Alphabet (GOOG), for instance was up 0.56%; Applied Materials (AMAT) gained 3.72%, Nvidia (NVDA) was ahead 3.03%, and Facebook (FB) was higher by 0.67%.
My guess is that these gains had more to do with profit taking by shorts ahead of the Thanksgiving holiday than with any incipient bounce by the worst trounced stocks. But something to keep an eye on for next week.
