Today's Coffee - Subpar Retail Scorecard
To see the current retail scorecard, visit our HOME PAGE at Wall Street Greek.
(Stocks in this article: NYSE: TGT, NYSE: WMT, NYSE: JWN, NYSE: JCP, NYSE: LTD, NYSE: AEO, NYSE: MW, NYSE: GPS, Nasdaq: ZUMZ, Nasdaq: WTSLA, NYSE: BKE, Nasdaq: PSUN, NYSE: PEP, Nasdaq: FAST, Nasdaq: INFY, NYSE: MTB)
Equities want to move higher, still buoyed by the 50 basis point cut of the Federal Reserve. The rally started in anticipation of the September move, and has continued buoyed upon it. However, we are fairly certain in our analysis that as we approach the Halloween meeting of the Federal Open Market Committee, with anticipation the Fed will leave the market hanging, equities should begin to discount that lack of further support. On the day of the Fed action, we noted our view that the Fed was heavily pressured by the Administration and Congressional leadership alike, whether directly or through implication, and acted on that basis. With credit markets breaking free from lock now, the Fed is likely to flex its own muscles a bit by not acting further in October.
We expect the tone of Fed governor conversation will continue focused on dollar weakness and the implications it carries, including the potential for inflation's return and decreased foreign investment in U.S. assets. Unless undeniable evidence surfaces of severe consumer weakness, and we might get some of that in tomorrow's retail sales report, we expect the Fed to hold steady. The market will view this let down comparable to the girl across the bar who stares and smiles at you, but when approached, rejects you like yesterday's news. In other words, we expect it to be a significant surprise and setback for stocks.
At that point, the market should refocus on the issues of consumer softness and dollar and economic weakness. There's a lot of power in that first rate cut that follows a period of restrictive action. It represents an inflection point, and return loves inflection points. However, a good portion of that return is born from expectation for further Fed follow through, and the Fed is about to pull that rug out from under the market's feet, in our view. We should rise up until the week before the Halloween meeting, and then investors will begin to increasingly anticipate a Fed letdown. This is why you read the Greek, for opinion daring enough to defy consensus and trend.
Retail Chain-Store Sales
Today offered the individual reports of chain-store sales from retailers across the gambit. For the most part, retailers disappointed, and this should become even more apparent in tomorrow's Retail Sales Report for September. The International Council of Shopping Centers has already reported September sales rose 1.7%, and the organization's Chief Economist, Michael Niemira, estimates the weather had a negative 0.5% impact to sales.
As we warned in our article, "3 Good Reasons to be Weary" the relatively warm weather this September and October, in comparison to last year, left sweaters on shelves and shoppers out enjoying the last little bit of Indian summer. However, the temperature was not the only driver behind the weak performance, and by now you are well aware of the burden the Atlas of the American economy, the consumer, is bearing. We further outlined this cost on spending in our article "As Consumer Confidence Tanks, Who Loses in Retail?" Perhaps that last piece should have been entitled, 'Everyone Loses in Retail," as even high-end participant Nordstrom (NYSE: JWN) reported disappointing results today, and subsequently lowered forward guidance. However, the high-end retailers still posted same-store sales increases for the most part, just lower than were projected by the non-weather attentive Wall Street. We continue to expect the high-end players to find less impact from strained consumer spending, and to find more capital from institutional investors who are in need a place to park retail segmented funds.
Notable disappointments included Target (NYSE: TGT), which reported a weaker than expected September, while revising its Q3 forecast lower. Q4 is at risk as well, as currently stocked inventory will need to be marked down to make room for holiday season goods. Target was not alone in the sea of Q3 earnings cutters, as it was accompanied by JC Penney (NYSE: JCP), Limited (NYSE: LTD), American Eagle Outfitters (NYSE: AEO), Men's Wearhouse (NYSE: MW) and The Gap (NYSE: GPS). As we foretold, teen retailers seemed to benefit from "back to school" spillover, as Zumiez (Nasdaq: ZUMZ), Buckle (NYSE: BKE), Wet Seal (Nasdaq: WTSLA) and Pacific Sunwear (Nasdaq: PSUN) all exceeded expectations.
Please note that we have changed our sidebar section, placing "Market-Moving News" in a position easier for readers to find. Over the next few weeks, you should notice some important additions to the sidebar. (disclosure)
Equities want to move higher, still buoyed by the 50 basis point cut of the Federal Reserve. The rally started in anticipation of the September move, and has continued buoyed upon it. However, we are fairly certain in our analysis that as we approach the Halloween meeting of the Federal Open Market Committee, with anticipation the Fed will leave the market hanging, equities should begin to discount that lack of further support. On the day of the Fed action, we noted our view that the Fed was heavily pressured by the Administration and Congressional leadership alike, whether directly or through implication, and acted on that basis. With credit markets breaking free from lock now, the Fed is likely to flex its own muscles a bit by not acting further in October.
We expect the tone of Fed governor conversation will continue focused on dollar weakness and the implications it carries, including the potential for inflation's return and decreased foreign investment in U.S. assets. Unless undeniable evidence surfaces of severe consumer weakness, and we might get some of that in tomorrow's retail sales report, we expect the Fed to hold steady. The market will view this let down comparable to the girl across the bar who stares and smiles at you, but when approached, rejects you like yesterday's news. In other words, we expect it to be a significant surprise and setback for stocks.
At that point, the market should refocus on the issues of consumer softness and dollar and economic weakness. There's a lot of power in that first rate cut that follows a period of restrictive action. It represents an inflection point, and return loves inflection points. However, a good portion of that return is born from expectation for further Fed follow through, and the Fed is about to pull that rug out from under the market's feet, in our view. We should rise up until the week before the Halloween meeting, and then investors will begin to increasingly anticipate a Fed letdown. This is why you read the Greek, for opinion daring enough to defy consensus and trend.
Retail Chain-Store Sales
Today offered the individual reports of chain-store sales from retailers across the gambit. For the most part, retailers disappointed, and this should become even more apparent in tomorrow's Retail Sales Report for September. The International Council of Shopping Centers has already reported September sales rose 1.7%, and the organization's Chief Economist, Michael Niemira, estimates the weather had a negative 0.5% impact to sales.
As we warned in our article, "3 Good Reasons to be Weary" the relatively warm weather this September and October, in comparison to last year, left sweaters on shelves and shoppers out enjoying the last little bit of Indian summer. However, the temperature was not the only driver behind the weak performance, and by now you are well aware of the burden the Atlas of the American economy, the consumer, is bearing. We further outlined this cost on spending in our article "As Consumer Confidence Tanks, Who Loses in Retail?" Perhaps that last piece should have been entitled, 'Everyone Loses in Retail," as even high-end participant Nordstrom (NYSE: JWN) reported disappointing results today, and subsequently lowered forward guidance. However, the high-end retailers still posted same-store sales increases for the most part, just lower than were projected by the non-weather attentive Wall Street. We continue to expect the high-end players to find less impact from strained consumer spending, and to find more capital from institutional investors who are in need a place to park retail segmented funds.
Notable disappointments included Target (NYSE: TGT), which reported a weaker than expected September, while revising its Q3 forecast lower. Q4 is at risk as well, as currently stocked inventory will need to be marked down to make room for holiday season goods. Target was not alone in the sea of Q3 earnings cutters, as it was accompanied by JC Penney (NYSE: JCP), Limited (NYSE: LTD), American Eagle Outfitters (NYSE: AEO), Men's Wearhouse (NYSE: MW) and The Gap (NYSE: GPS). As we foretold, teen retailers seemed to benefit from "back to school" spillover, as Zumiez (Nasdaq: ZUMZ), Buckle (NYSE: BKE), Wet Seal (Nasdaq: WTSLA) and Pacific Sunwear (Nasdaq: PSUN) all exceeded expectations.
Please note that we have changed our sidebar section, placing "Market-Moving News" in a position easier for readers to find. Over the next few weeks, you should notice some important additions to the sidebar. (disclosure)
posted by The Greek | 1:30 PM
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