Talk about mixed messages.
This story first appeared in the October 29, 2008 issue of WWD. Subscribe Today.
On the day the government reported consumer confidence hit an all-time low, retail shares were driven up a record-shattering 13.6 percent. But there is little optimism the gains will stick, further illustrating the difficulty of sailing the corporate seas in the current economic storms.
The Standard & Poor’s Retail Index shot ahead 33.19 points to 277.59 as investors bought beaten-down shares and held out hopes the Federal Reserve Board would cut interest rates today.
The stock jump, helped along by a rally in the final hour of trading, made for the largest single-day increase since the index was recalibrated in mid-2002.
The previous record was a 9 percent rise on Oct. 13, when investors snapped a string of eight losing days in the market.
Going into Tuesday’s trading charge, retail shares had lost 37.7 percent of their value over two months and were viewed by many as a bargain.
“It was like the bridal gown sale at Filene’s Basement — investors just rushed through the doors and bought up those heavily discounted stocks,” Richard Yamarone, chief economist at Argus Research Corp., said.
Still, it is anyone’s guess if stocks have hit their lows or will plunge once again.
“When you see these stock prices start to whipsaw as they have in several of the last trading sessions, you’re seeing the market struggling to find the bottom,” Yamarone said.
Even as Wall Street bounces along in the wake of the now-easing credit crisis, the economy is still seen as slowing.
“It looks like it’s going to get worse before it gets better, but I don’t expect it’s going to fall off a cliff,” Yamarone said.
But for once investors were in the mood to see the bright side of just about everything and might have even counter-intuitively read the Conference Board’s worst-ever reading on consumer confidence as a positive signal.
“If we’re at all-time lows, then geez, maybe the only direction we can go is up,” Paul Nolte, director of investments at Hinsdale Associates, said. “And if energy prices have come down as much as they have, maybe spending gets a little bit better. With the market going up like this, people are a little bit more interested in maybe putting some money to work in the marketplace [in retail stocks].”
Oil fell to $62.73 a barrel Tuesday, down from highs of more than $140 earlier this year.
Investors were also buoyed by the notion of cheaper money after an anticipated interest rate cut.
The Fed last lowered the federal funds rate on Oct. 8, reducing the benchmark that determines how much it costs banks, businesses and consumer to borrow to 1.5 percent from 2 percent.
A sense that stocks are cheap, interest rates are on their way down and that consumer sentiment could begin to stabilize is still only part of the market psychology.
“Maybe we’re finally starting to see, not a return to normal, but we’re moving in that direction and that is really more key I think than anything else,” Nolte said. “That market is inexpensive and what we’re doing and what we’re telling our clients to do is to slowly add money to the market over the next three to six months.”
The Dow Jones Industrial Average leapt 10.9 percent, or 889.35 points, to 9,065.12 — posting its second-highest point jump on record.
Broadline chains posting double-digit increases in their stock prices included: Target Corp., up 17.8 percent to $38.51; Sears Holdings Corp., 17.8 percent to $57.25; Macy’s Inc., 15.9 percent to $10.34; Saks Inc., 14.9 percent to $5.70, and Wal-Mart Stores Inc., 11.1 percent to $55.17.
Among those regaining ground in the specialty world were Limited Brands Inc., 21.9 percent to $12.41; Chico’s FAS Inc., 20.6 percent to $3.10; Bebe Stores Inc., 17.1 percent to $7.21, and Aéropostale Inc., 16.9 percent to $24.46.
Vendors also enjoyed a run-up in their stocks, with Coach Inc. up 20.5 percent to $19.38; Warnaco Group Inc., 18.1 percent to $26.65, and Jones Apparel Group Inc., 16.1 percent to $10.02.
Shares of General Growth Properties skyrocketed $1.42, or 72.1 percent, to $3.39 after the company named Adam Metz as interim chief executive officer and Thomas Nolan Jr. interim president, and put its three Las Vegas properties — Fashion Show Mall, Grand Canal Shoppes and The Palazzo — up for sale. John Bucksbaum, former ceo, will continue to serve as chairman and Michaels will retain the title of chief operating officer, but give up his seat on GGP’s board.
Shares of GGP hit a 52-week high of $54.53 last November.
Michaels and Bernard Freibaum, who was earlier let go as chief financial officer, received unsecured loans from a Bucksbaum family trust that were used to cover margin calls on the purchase of company stock. Michaels’ loan has been repaid, but Freibaum’s had not been at the time of his termination earlier this month.