WalMart, Macy’s and Retail’s Mixed Report Card
Increasingly, the story of retail is the story of a flourishing upper end, a consistent low end and a deteriorating middle. This is the lens through which, for example, active investors and traders see that Sears (NYSE: SHLD) will be closing more than 100 stores as part of a cash-raising effort. Up 1% in trading on Wednesday, the stock rallied from not just oversold conditions in bear market territory, but SHLD’s lowest levels of the year, as well.
At the other end of the retail spectrum are stocks like Macy’s (NYSE: M). Shares of Macy’s rallied to their highest levels of the year just under a month ago, and have been heading back to that territory after gaining for five out of six sessions – up more than 1% on Wednesday alone.
Traders are also in the market as buyers when it comes to another major retailer, Kohl’s (NYSE: KSS). Kohl’s is back in bear market terrritory after rallying to its highest levels in months back in Novembver. But unlike Sears, Kohl’s has been attracting buyers over the past several days, finishing higher for four out of the past six trading days. This includes Wednesday’s session, during which KSS added nearly half a percent.
Heading into trading on Thursday, the neutral ratings of Macy’s have begun to deteriorate, and traders should be alert to the possibility of the stock earning downgrade to our “consider avoiding” level on additional buying. Even more so, overbought conditions in Kohl’s have already earned that stock a “consider avoiding” rating of 3 out of 10.
Traders and investors looking for edges in this sector may want to spend more time on the pullback in Walmart (NYSE: WMT), now in its second day. Profit-taking in the stock, which rallied to its highest levels of the year earlier in the week, has trimmed a little off the top of WMT. And with a neutral rating of 5 out of 10, Walmart provides no immediate incentive for traders looking for upside to come off the sidelines.
But should the broader market continue lower over the next few days, the urge to lock in gains among those traders and investors who have made them may be that much stronger. And should the subsequent sellling prove strong enough, ratings upgrades and potential opportunities for short-term traders will likely not be far behind.
The stocks in today’s report were drawn from the data and research available through PowerRatings. To find out more, click here.
David Penn is Editor in Chief of TradingMarkets.com