Big discounts on retailing stocks

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The red-tag sale signs dotting the aisles of retailers across the country Friday could just as easily be referring to the companies’ stock prices.

Despite the stock market’s fifth straight advance, retailing shares slumped as the official holiday shopping season got underway. The Standard & Poor’s retail-stock index fell 1.6% even as the S&P 500 rose 1% in an abbreviated trading session.

Retailers had rallied alongside the rest of the market earlier this week on hope that the government’s multi-pronged economic-revival plans would work. The sector had been so beaten down that it was due for a bounce.

Even with today’s decline, the retail index is up 23% in the last five days versus 19% for the overall S&P. And the retail gauge is actually faring slightly better than the S&P 500 this year -- down 36% versus 39% for the broader index.

But the prospects for the retail sector seem far gloomier than for the overall market. The weak economy is all but certain to make this one of the weakest spending seasons in years. And though ubiquitous sales may help to pack shopping malls, they’ll cut deeply into earnings.

The big unknown is whether the nation’s newfound austerity will last -- or at least linger awhile -- or yield right away to something approaching the usual profligacy once the economy begins to perk up.

That uncertainty is one reason high-end stores have generally lagged behind discounters. Nordstrom Inc. is down 69% this year, while Wal-Mart Stores Inc. is up 18%. Electronics retailers such as Best Buy Co. and GameStop Corp. are each down more than 60%.

Retailing stocks could get a boost in coming days if consumer spending appears to be anything short of horrible.

But the first half of 2009 could be grueling, at least until clearer signs emerge as to when shopping will return as the national pastime.

-- Walter Hamilton