“I can’t cook a Thanksgiving dinner. All I can make is cold cereal and maybe toast.” – Charlie Brown
Chart of the Day
Good morning!
Third-quarter earnings from Walmart, Ross Stores, and TJX, the parent-company of T.J. Maxx, have been a rare bright spot in an otherwise lackluster year for retailers.
Releases from a handful more this week will show whether investors can expect a reversal for the broader retail segment any time soon, especially ahead of the typically busy holiday quarter.
The SPDR S&P Retail exchange-traded fund, which includes about 80 retailers from Victoria’s Secret to Five Below, is flat on the year, while the S&P 500’s is up 14% even with the recent swings.
Economic data and results from the star retailers who’ve already reported signal that one big way to get investors excited is to show that higher-and middle-income consumers, too, are flocking to them for deals, to help make up for the lower ones who are paring back.
Dick’s Sporting Goods and Best Buy this morning, along with Macy’s on Wednesday, would be the best examples to figure that out. That’s because those three sit in that special spot where consumers of all economic backgrounds converge. Dick’s shares are down 9.9% this year, Best Buy has tumbled 12%, and Macy’s has added 18%.
Despite all the curveballs thrown at consumers like tariffs making certain items more expensive and workers being mostly unable to switch jobs to bag salary increases, U.S. consumer spending overall still looks pretty strong this year. This holiday season, though, is set to further test their appetite for spending.
The National Retail Federation expects retail sales between November and December will top $1 trillion for the first time. They predict the number will grow by 3.7-4.2% from a year ago, but that’s below the 4.3% increase it notched in 2024.
What that tells me is that while consumerism reigns supreme, many of us are hunting for a good deal in this K-shaped economy. The baseline expectation is that lower-income consumers aren’t faring well, so instead, the market narrative has evolved toward paying greater attention to whether the higher-and middle-income consumers are still spending at the same pace. After all, they’re the ones doing the most to keep the economy afloat. If they slip, then that’s a warning sign for where the economy could be headed.
Consumer spending is closely watched because it’s the biggest driver of economic growth. If spending is too strong, then it could be a factor that supports the Federal Reserve holding interest rates steady at the December meeting. Vice versa, if the spending is too little, Fed members might be inclined to cut interest rates.
They will also consider this morning’s U.S. September retail sales, which rose 0.2% from a month before. That came in lower than expectations of a 0.3% increase, and the previous month number was left unrevised to a 0.6% gain.
If it helps investors, many retail stocks are trading at steep discounts compared to the broader market. Even with the recent run-up, Walmart is trading at 35.84 times its projected earnings over the next 12 months, while Ross is at 24.94. The S&P 500’s multiple is 39.45.
Also yet to report but likely not as important to watch unless a crazy move occurs are Abercrombie & Fitch, Burlington, Kohl’s, Petco, and Urban Outfitters.
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📧✍️Here’s what a reader commented📧✍️
Q: Are you planning to keep holding your Nvidia after last week?
A: I will hold the Nvidia share which I bought during the pull back post the most recent results. I am reading Mark Minervini’s Trade like a Wizard book and this seems like the exact share he would have bought. In fact because of reading his books ok I am seeing why Fundstrat has the methods and views that it has on Nvidia and in constructing its Granny Shots. Based on Mark Minervini’s process Nvidia is not topping yet and the people who are screaming bubble is the ones who have missed out on it. I was one of them. As I traded in and out of Nvidia and then got left behind.
Catch up with FS Insight
We discuss how this selloff of 6% the Oct highs is actually pretty routine. And we list the 5 arguments for why stocks rally into YE. Keep in mind, we expected chop in the first half of November.
Technical
It’s thought that both the US Dollar and the US Treasury yields might begin to rally in unison ahead of the FOMC before dropping back to new monthly lows into January.
Crypto
The Coinbase–Binance spread flipped into a clear U.S. premium during market hours for the first time in a while. The 7-day average of the Coinbase premium/discount has flattened, suggesting U.S. selling pressure is easing.
News We’re Following
Breaking News
- Russia signals it could reject modified US peace plan for Ukraine FT
- US retail sales growth slowed in September FT
Markets and economy
- Trump’s gas price discount has disappeared CNN
- Fed Chair Powell’s Allies Provide Opening for December Rate Cut WSJ
- When Home Sellers Set Prices Too High, They’re Paying for It WSJ
Business
- Why Google’s Soaring Stock Is Defying Fears of an AI Bubble WSJ
- Why Google’s AI Wins Are Bad News for Nvidia Stock and the AI Trade BR
- Domino’s Pizza parts ways with chief who bet on fried chicken FT
- Nvidia says it’s not Enron. Michael Burry makes a different dot-com parallel. MW
Politics
- $10 Billion and Counting: Trump Administration Snaps Up Stakes in Private Firms NYT
- Judge dismisses Comey, James indictments after finding that prosecutor was illegally appointed AP
Overseas
- Robots and AI Are Already Remaking the Chinese Economy WSJ
- The case that won’t go away: ECB reportedly investigates allegations of financial irregularities at Deutsche Bank MW
Of Interest
- Faux Jewels and Slimming Belts: Why Shopping on TikTok Is a Lot Like QVC NYT
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| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 11/25 | 8:30 AM | Sep PPI m/m | 0.3 | -0.1 |
| 11/25 | 8:30 AM | Sep Core PPI m/m | 0.2 | -0.1 |
| 11/25 | 9:00 AM | Sep Aug Case Shiller 20-City m/m | 0.1 | 0.19 |
| 11/25 | 10:00 AM | Nov Oct Conf Board Sentiment | 93.3 | 94.6 |
| 11/26 | 8:30 AM | Sep P Durable Gds Orders | 0.5 | 2.9 |
| 12/1 | 9:45 AM | Nov F Oct S&P Manu PMI | n/a | 51.9 |
