/https://specials-images.forbesimg.com/imageserve/5fb3dd959fbe4db34db8c13a/0x0.jpg?cropX1=0&cropX2=3264&cropY1=149&cropY2=1985&w=1200&resize=1200,675&ssl=1 "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.
Couple buying paper towels at a Walmart store as panic buying resumes ahead of the second wave of … [+]
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Key Facts
The Dow Jones Industrial Average ended the day down about 170 points, or 0.6% after closing at a record high on Monday, while the S&P 500 fell 0.5%, and the tech-heavy Nasdaq ticked down 0.2%.
The Census Bureau released data on Tuesday morning showing that retail sales fared worse-than-expected in October, climbing just 0.3% month-to-month.
Meanwhile, September’s growth figure–which boosted optimism upon its release–was revised down to 1.2% from 1.5%, and Morgan Stanley in a note to clients warned of a “difficult winter” to come that should result in lower consumer spending into the new year.
Early on Tuesday, Walmart posted better-than-expected third-quarter results, including profit that surged 56% year over year to $5.1 billion–thanks in part to delayed back-to-school spending through October and continued strength in the firm’s grocery sales; Home Depot also posted a beat, but its shares (like Walmart’s) fell about 2% on Tuesday.
Elsewhere in retail, shares of CVS and Walgreens tumbled 9% and 10%, respectively, after ecommerce juggernaut Amazon announced Tuesday morning that it’s launching an online pharmacy with free delivery for its Prime members.
Tesla stock continues to soar back toward record highs after S&P Global announced after the market close on Monday that it’s adding the electric-carmaker to the S&P 500 Index; shares surged 8% and have more than quadrupled this year alone.
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)
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