The sector shot up 3.7 percent Wednesday, registering its best showing since May after unexpectedly strong growth in the U.S. manufacturing sector hinted that the recent doom and gloom in the markets could be overdone.
Shell-shocked investors might also have gotten just a bit giddy given the dearth of good news and taken money from safer bets, like utility stocks, and moved it back into retail.
“It’s kind of like the ‘Karate Kid’; instead of wax-on, wax-off, it’s risk-on, risk-off and today it’s risk on,” said Paul Nolte, managing director at Dearborn Partners in Chicago.
Nolte noted the Dow Jones Industrial Average, which perked up 2.5 percent to 10,269.47 Tuesday, has been caught between 9,800 and 11,000.
“The daily movement is a lot of noise about nothing,” he said. “Not much has changed in the overall economy as well as in the equity markets until that range gets broken.”
The S&P Retail Index jumped 14.85 points to 411.59. Among the retail gainers were The Bon-Ton Stores Inc., up 10.6 percent to $7.02; The Talbots Inc., 9 percent to $10.88; Stein Mart Inc., 8.2 percent to $7.82; Macy’s Inc., 4 percent to $20.19; Kohl’s Corp., 3.1 percent to $48.40, and Aéropostale Inc., 2.7 percent to $21.87.
Some of the air came out of Saks Inc.’s stock, which fell 6.1 percent to $7.42 following Tuesday’s 19.7 percent rally fueled by takeover rumors.
The low expectations for retailers have led to low stock prices, relative to earnings.
“You’ve got some abjectly cheap stocks that have some pretty good performance outlooks,” said Robert F. Buchanan, an assistant finance professor at Saint Louis University and former research analyst, citing Kohl’s and Aéropostale.
Competition for shoppers’ dollars is also heating up.
“Let’s say consumer spending remains weak — what do you have to do as a retailer to post good numbers?” asked Buchanan. “You have to punch another retailer in the nose and take her market share away.”
How the latest bout went will become clearer today, when retailers report what are generally expected to be lackluster same-store sales results for August. “The bar’s been lowered, expectations have been reset for the back half at this point,” said Amy Noblin, analyst at Weeden & Co. “We’re certainly not expecting anything big out of August sales. Investors are really trying to gauge whether the level of guidance that was provided over the last couple of weeks was provided at the low point of the quarter.”
The Institute for Supply Management said the U.S. manufacturing sector expanded more than expected in August. The group’s PMI Index rose to 56.3 in August from 55.5 in July, where economists expected a slowdown to 53. Anything over 50 indicates growth.
The stock charge was strong enough to defy a negative take on jobs from the ADP National Employment Report, which showed that private sector payrolls slid by 10,000 in August versus July. Investors are still looking ahead to Friday’s employment report from the Labor Department, which is expected to show that payroll losses moderated.
“The sentiment in the market has been just so horrendously negative for a number of months now that any kind of economic data that is suggestive of real recovery is greeted with enthusiasm,” said Kenneth Stumphauzer, analyst at Sterne Agee. “We’ll probably see a lackluster jobs number on Friday and we’ll probably give it all back.”
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)
@heriethpaul and @gracebol have a moment on the @victoriassecret fashion show 2017. See every look from the runway on WWD.com. Link in bio. (📷: @giovanni_giannoni_photo) #wwdfashion #victoriassecret #VSFashionShow
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia