Big-box retailer Macy’s (M) cuts its guidance for comparable store sales, earnings, and revenue for fiscal 2019 on weaker than expected holiday sales.
Kohl’s (KSS) reported a 1.2% increase in holiday comparable store sales. The company said that fiscal year earnings are expected at the upper end of the company’s guidance to Wall Street. Target (TGT) reported a 5.7% increase in holiday comparable store sales and affirmed its prior earnings guidance. These actual results from retailers come in the context of a report from MasterCard (MA) or the strongest year over year growth rate in holiday sales–at 5.1%–since 2011.
Given that mixed picture the market decided to punish the retail sector but not to generalize from those results to the economy as a whole. As of 2:30 p.m. New York time shares of Macy’s were down 18.63%. Kohl’s share were down 6.36%. Target had dropped 3.36% and JC Penney (JCP) was off 3.73%.
But stocks as a whole were marginally higher with the Standard & Poor’s 500 ahead 0.18%. The Dow Jones Industrial Average had gained 0.21%. The NASDAQ Composite index was up 0.11% and the small Company Russell 2000 index had climbed by 0.21%.
The thinking seems to be that Macy’s troubles are indicative of continued declines in the Big-box retail sector as Amazon (AMZN) and other online merchants continue to devour market share. Specific numbers in Macy’s announcement today reinforce that logic. The company revised its gross margin view for the period that ends on January 31, 2019 from sightly up to sightly down. Spending in the SG&A category that reveals any increase in spending on marketing and promotions was up in today’s news versus flat in prior guidance. That certainly suggests that Macy’s had increased spending on marketing and promotions in an effort to boost holiday sales.
There’s something else at work here too. At 2589.88 as of 2:30 p.m., the S&P 500 is right in the midst of the 2575 to 2600 range that serves as a pivot point for stocks at the moment. A break above that 2600 level would suggest that the current bounce has longer to run and might even be about to turn into a genuine rally. Investors and traders are understandably reluctant to sell if that’s about to happen so they’re hanging tough in the hopes that something–earnings reports that begin next week, news from the U.S.-China trade talks, or further dovish talk from the Federal Reserve about a pause in interest rate increases in 2019–will emerge to push stocks through that barrier. On the other hand, the market seems reluctant to make a big bet on breaking 2600. Stocks are moving up but not with any great surge of optimism.
In other words, the market is waiting for the data picture to more clearly indicate the direction of the economy.