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Retail Apparel Stocks' Weakness Deepens

Originally published Jan. 3 at 11:52 a.m. EDT

Retail stocks (e.g., JCPenney (JCP) - Get Report ) are being kicked in the groin this morning.

The first real retail data comes out on Thursday from L Brands (LB) - Get Report , GAP (GPS) - Get Report and Ascena Retail (ASNA) - Get Report .

I expect industry comps from real stores at 0-2%. Industry at 4%. Online at 20%.

Online remains the category killer as Amazon (AMZN) - Get Report (which makes no money) reaps ever-more market share.

Overall, apparel seems on the weak side. Still, huge free cash flow (as I recently wrote) and secularly low valuations.

One positive is terrific emerging consumer economics.

As well, in the fullness of time, apparel needs replacing.

I have added to JCP this morning.

Position: Long JCP large; short JCP puts.

My Takeaways and Observations (3:30 p.m. Edition)

Originally published Jan. 3 at 3:33 p.m. EDT

The markets started Tuesday like Usain Bolt at the start of a 100-meter race. But, unlike Bolt, the finish wasn't as strong as the start.

I thought one of the day's features was the reversal in bond yields, particularly after the good data.

The day started with a Trump Twitter storm.

Good food for thought from my pal Peter Boockvar on possible positives and negatives for the new year.

Moved to large-sized in Allergan (AGN) - Get Report last week. Allergan is raising a number of drug prices by about 9%. (Management said it is consistent with its commitment to hold down drug prices expressed in 2016). Investors liked, and the shares rose by another $6.

Speaking of Usain Bolt, I continue to go for the gold.

The Mighty Oak might have been the subject of tax-loss selling--as I guessed last week.

A quick synopsis of retail apparel woes -- the sector had a worse day than Mariah Carey's New Years Eve performance. I explained why I added to my large JCPenney (JCP) - Get Reportlong.

Back to net (but small) short.

I was interviewed on Bloomberg's "Market Surveillance" this morning.

Today was Byron Wien's turn to give his Surprises.

I added incrementally to individual stock shorts on strength this morning.

At 3:30 p.m. the market was bending but not breaking.

  • The U.S. dollar strengthened today, but closed well off the day's (spike) high.
  • Oil vey! Crude down $1.46 after trading higher in the early going.
  • Gold up $9. I like and added to my growing SPDR Gold Trust ETF (GLD) - Get Report long. I discussed my rationale in my Bloomberg interview.
  • Ag commodities: wheat down $0.01, corn up $0.04, soybeans down $0.08 and oats up $0.07.
  • Lumber down $2.
  • Bonds got schmeissed early on with 9-basis-point rise in the 10-year but the gain declined to only 2 basis points by day's end.
  • The yield on the 10-year closed at about 2.45% (up 2 basis points) and the long-bond yield rose by less than 1 basis point.
  • Municipals were for sale, but closed-end muni-bond funds ripped. Not sure why ... maybe just a cessation of tax selling.
  • Junk wasn't junky and Blackstone/GSO Strategic Credit Fund (BGB) - Get Report climbed by another $0.11.
  • Banks were stronger, but off day's highs. If there was ever a consensus view of a sector, banks are it!
  • Insurance was relatively quiet. I added to my Lincoln National (LNC) - Get Report and Metlife (MET) - Get Report shorts--liking the reward vs. risk now. And I recently added to my Hartford Financial (HIG) - Get Report long.
  • Brokerages higher but well off highs, Goldman Sachs (GS) - Get Report dramatically so.
  • Old tech was quiet.
  • Retail was lower but has begun to creep up late in the day.
  • Autos had a nice showing in light of Trump Twitter storm.
  • Biotech strong led by Celgene (CELG) - Get Report , Gilead Sciences (GILD) - Get Report and my fav, Allergan. Merck (MCK) - Get Report shorts were squeezed (up $8), but speculative biotech did little.
  • Fertilizers flatlined as ag commodities were mixed.
  • Consumer staples were mixed as the currency got stronger. Another up day for Campbell Soup (CPB) - Get Report .
  • Ag equipment up, with both Deere (DE) - Get Report and Caterpillar (CAT) - Get Report up a beaner. Shorted more Caterpillar as I favor upside/downside opportunity now.
  • (T)FANG was very strong most of the day but is weakening as the day progresses. Alphabet (GOOGL) - Get Report up nicely.
  • In individual stocks Oaktree Capital (OAK) - Get Report gained (maybe tax selling is over), DuPont (DD) - Get Report holding well, along with Radian (RDN) - Get Report . Apple (AAPL) - Get Report didn't participate in the market rise.

Here are some value-added contributions on our site today:

    Welcome back Jimmy! Jim "El Capitan" Cramer on the hit and miss parade.

    Tom Graff on navigating the bond market.

    "Meet" Bret Jensen on biotech takeovers. (interesting stuff!)

    A market assessment (midday) from Rev Shark.

    Steve Blitz on the ISM data blitz!

    Positions --
    Long: AGN large, CPB large, HIG large, JCP large, OAK, DD small, RDN, HIG large

    Short: SPY, QQQ, IWM, CAT, MET, LNC, DIS, SBUX small, AAPL

    Position: See above.

    Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AGN, GOOGL and AAPL.

    Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.