The Week Ahead -- All Eyes on Black Friday and Retail Stocks
When you see hordes of shoppers on television later this week scratching and clawing each other liked crazed post-Apocalyptic survivors, remind yourself that this spectacle is crucial to the American economy.
You see, about three-fourths of U.S. gross domestic product is made up of consumer spending, and in turn about three-fourths of consumer spending occurs during the holidays. And of course, the traditional start to the seasonal spending madness is "Black Friday," the day after Thanksgiving.
Unlike several shaky sectors right now, retailing enters the new week with accelerating momentum.
It's been a bumpy ride for retail this fall, but many of the sector's bellwether stocks have enjoyed a nice bounce over the past five days: Abercrombie & Fitch is up 23%; TJX Companies is up 9.2%; Walmart Stores is up 6.5%; Costco is up 6.1%; Michael Kors is up 6.0%; Amazon.com is up 4.1%; and J.C. Penney is up 4.7%.
The decliners over the past five days include Macy's, which is down 1.3%; Target, which is down 1.5%; and perennial laggard Sears, which is down 10%. Over the same five-day period, the SPDR S&P Retail ETF (XRT) - Get Report is up 4.2%, slightly better than the S&P 500's 3.3% gain.
Considering the retail sector's wild swings over the past couple of months, these recent upticks are an auspicious way to begin Thanksgiving week. Undue pessimism over the resilience of the consumer, as well as over certain pieces of disappointing earnings news (particularly Walmart's), has been giving way to the realization that consumers, and by extension the economy, are actually in good enough shape to sustain healthy holiday shopping this season. Freer spending shoppers will do much to buoy the overall stock market as 2015 draws to a close.
Retail stocks to watch in the week ahead are Dollar Tree, Guess, and Tiffany & Co., all of which report operating results on Tuesday, Nov. 24.
Meanwhile, this week's economic reporting calendar is a busy one, with a host of crucial indicators to digest along with your turkey:
Monday, Nov. 23:
PMI Manufacturing Index Flash
Existing Home Sales
Tuesday, Nov. 24:
GDP
Corporate Profits
S&P Case Shiller HPI
Consumer Confidence
Wednesday, Nov. 25:
Durable Goods Orders
Jobless Claims
Personal Income and Outlays
Consumer Sentiment
FHFA House Price Index
New Home Sales
EIA Petroleum Status Report
EIA Natural Gas Report
Signs point to future tailwinds for retail stocks, but there's an entire group of stocks that face nothing but headwinds. If you want to see a list of the absolute worst stocks you can own right now, I urge you to take a look at this report called 29 Dangerous Stocks: Sell Now! Inside, you'll see a full list of the market's most overvalued stocks, and learn the process you can use to keep avoiding them in the future. Click here now for a copy.
John Persinos is editorial manager and investment analyst at Investing Daily. At the time of publication, the author held no positions in the stocks mentioned.