The Grinch might be a short seller this Christmas season.
Retail stocks were tanking across the board on Thursday, as a much worse-than-expected November retail sales report early Thursday, combined with Wednesday’s latest announcement from the Federal Reserve, had markets under heavy selling pressure.
In early afternoon trading, shares of Macy’s (M) were off 3.9%, while shares of Target (TGT) and Abercrombie & Fitch (ANF) were down more than 4%, among other notable names underperforming in the retail space.
The VanEck Retail ETF (RTH) — which counts Amazon, Home Depot and Walmart as its top three holdings — was off 2.5% in afternoon trade. The SPDR S&P Retail ETF, XRT, was down 3%.
These moves also come amid a washout across equity markets, with the Nasdaq down as much as 3% in early afternoon trade.
But this investor caution on retail in particular does appear misplaced after this morning’s latest retail sales data.
The government’s retail sales report showed out Thursday morning showed spending fell sharply in November as the key holiday shopping season kicked into high gear.
Retail sales showed a decline of 0.6% over the prior month.
Sales declines were notched in most retail sales categories, notably discretionary items shoppers have pulled back on amid higher prices and a slowing economy. Online retailers, general merchandise, and clothing stores all reported sales declines.
This poor read on retail sales has raised investor fear retailers may end the important holiday season with excess inventories, pressing profit margins and leading to lackluster fourth quarters.
“The headwinds of the past year are catching up to consumers and forcing them to be more conservative in their holiday shopping this winter,” Morgan Stanley economist Ellen Zentner warned in a client note.
“While last year consumers rushed to buy gifts early due to low inventories, this year 70% of consumers are waiting for discounts before starting their holiday shopping. As such, holiday spending will likely be softer this November/December with more shopping back-loaded .”
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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