Retail stocks get the recession memo as sales plunge
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A big test in today’s renewed stock market rout will be whether key indexes can hold above their five-year lows reached on Friday.
The retail sector has already flunked that test. On the heels of the abysmal report on September retail sales -- which recorded the biggest drop in three years -- shares of major store chains have tumbled through last week’s lows.
With about 20 minutes to go in the trading session, Nordstrom Inc. was down $2.07 to $16.81, its lowest since 2004. Kohl’s Corp. was off $2.53 to $29.97, the lowest since 1999. And Macy’s Inc. slid $1.31 to $9.19, a level the stock hasn’t seen since 1995.
It’s hard to understand, but some investors seem to just be coming to grips with how much trouble the U.S. consumer is facing.
As Goldman Sachs & Co. economists noted in a report today on the September sales data:
Retail sales were extremely weak, both in absolute terms and relative to consensus. Total retail sales fell by 1.2%, pulled down by weak auto sales as spending declined by 3.8%. However, even outside of autos spending is very weak, down by 0.6%. Even excluding all the volatile measures -- ex gasoline, auto dealers and building materials -- spending is still very weak; this measure fell by 0.7%. In fact, it is tough to find any bright spots, as spending in all categories except health/personal care and gasoline stations declined. With the stimulus in the rearview mirror, consumers are sharply pulling back their spending.
From Bernard Baumohl at Economic Outlook Group:
We now have a consistent series of reports telling us that the deteriorating job market, falling incomes, collapsing stock market, plummeting home values, and the credit crises have forced Americans to shut down spending. Everyone, it appears, is now hunkering down in preparation of a painful recession. Over the last 12 months, retail sales have fallen 1% in current dollars, and about 6% in real terms (inflation adjusted). When consumers slash spending by these magnitudes, you know the economy is going to take a major hit.