Stocks Slip On Worse-Than-Expected Retail Sales Ahead Of ‘Difficult Winter’ To Come

Topline

Despite promising earnings beats from Walmart and Home Depot, stocks pushed down from record highs on Tuesday after new data from the Census Bureau showed that retail sales–a previously booming indicator–did worse than believed in September and came in below expectations in October.

Key Facts

Key Background

Despite an ongoing surge in Covid-19 cases around the country, optimism on the vaccine front has largely dominated market headlines over the past week after Pfizer said last Monday that its coronavirus vaccine candidate, with a 90% efficacy rate, was proving to be better-than-expected at preventing the virus. That news accelerated a stock-market rotation away from big-tech and stay-at-home stocks to more cyclical, value-oriented stocks that have faltered during the pandemic. When Moderna followed up with its own blowout vaccine candidate data this Monday, shares in financials, energy and cruise-liners were among the day’s best market performers. 

Crucial Quote 

“The market is set up for record success in the short-term, not because of the vaccine itself but because of the efficacy rate of the potential vaccine,” says Andrew Slimmon, a managing director and senior portfolio manager at Morgan Stanley Investment Management, adding that the market priced in a vaccine that was up to 70% effective–not over 90%. Slimmon believes there’s “tremendous opportunity in reopening stocks” that are buoying the market right now, as evidenced by the recent boom in energy, financials and tourism, but he’s more bearish for the long-term market outlook. “Sure, the market looks as healthy as ever right now, but the problem is that if and when we are faced with an unknown risk, it could potentially crush the market.”

What To Watch For

Retail earnings continue this week with Lowe’s, Target, Nvidia and TJMaxx all reporting on Wednesday, while Intuit, Macy’s and Foot Locker are among firms reporting on Thursday and Friday.

Tangent

Global stocks were also mixed on Tuesday. The United Kingdom’s FTSE 100 Index fell 0.9%, France’s CAC 40 ticked up 0.2%, and Hong Kong’s Hang Seng Index ended the day up 0.5%.

Further Reading

Tesla Set To Join S&P 500 Next Month–And Shares Are Soaring (Forbes)

Billionaire Jeffrey Gundlach: U.S. Stocks Are ‘Way Overvalued’–Here’s Why (Forbes)

Here Are The Stocks Surging The Most As Vaccine Prospects Boom (Forbes)