Wall Street celebrated Thursday after the Commerce Department reported that government stimulus helped pull the U.S. economy out of a year of painful contraction and push up third-quarter gross domestic product up 3.5 percent.
While the news didn’t erase persistent doubts about the holiday season and beyond, it did advance the S&P Retail Index 2.5 percent, or 9.47 points, to 391.06, not far from its high for the year of 402.49, set on Monday. The Dow Jones Industrial Average added nearly 200 points, jumping 2.1 percent to 9,962.58, its biggest increase since July 15. However, the Dow failed to reclaim the 10,000 mark last seen on Monday.
The good news about GDP was accompanied by word of a 3.4 percent rise in personal consumption expenditures, even if they were mostly due to the summer’s Cash for Clunkers auto incentive.
“The recovery has started, but in its early phases it won’t feel like a recovery,” said Nariman Behravesh, chief economist at IHS Global Insight.
In addition to the auto program, tax incentives for first-time home buyers and rising inventories made the quarter appear stronger than it really was, Behravesh said. The government will also make two revisions on Thursday’s advance GDP estimate.
GDP growth is likely to remain positive in the next few quarters, but it will be less robust, Behravesh said.
Commerce Secretary Gary Locke said the report shows “we’re headed in the right direction.”
Retailers, who have spent the last year cutting payrolls and culling inventory, might also be seeing slight signs of improvement, but overall holiday sales are still expected to be about flat with last year’s dismal outing.
“If you have superior product, that consumer is starting to trickle back,” said Christine Chen, equity analyst at Needham & Co., pointing to recent positive financial guidance from J. Crew Group Inc. and Lululemon Athletica Inc.
“These are brands that have adjusted the assortment so that there’s more fashion, brought in more appropriate price points and have, I would argue, a competitive advantage,” she said. “Either it’s brand, it’s quality, it’s something.”
Higher-end consumers in particular are showing signs of life, she noted.
“As things stabilize, the consumer feels a little bit better about their situation,” Chen said.
For now, at least, the new reality includes much uncertainty on the job front.
Even though initial claims of unemployment insurance fell 1,000 last week to 530,000, according to the Labor Department, the job market seems set to weaken further. Unemployment is already at a 26-year high of 9.8 percent and many economists expect it will top 10 percent before stabilizing next year.
Investors, though, have poured into retail stocks in hopes that cost cuts will lead to better fourth-quarter earnings and gross margins even if sales are flat. Retailers riding the market up included Saks Inc., which rose 8.8 percent to $5.93; Nordstrom Inc., 5 percent to $32.19; J. Crew, 4.6 percent to $41.81; Lululemon, 4.5 percent to $26.24; Macy’s Inc., 4 percent to $18.37, and Coach Inc., 3.3 percent to $32.87.
On the supplier side, Revlon Inc.’s stock shot up 43.3 percent, more than any other New York Stock Exchange issue, to $8.24 after the company reported better third-quarter profits from continuing operations.
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye