Tech-Led Bloodbath Hurting Retail Stocks: TGT, BBY, KSS & More

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Tuesday, November 20, 2018

Stocks continue to sell off in today’s pre-market, after another bruising Monday in regular-day trading. Downward expectations in important economic units like iPhone shipments are helping pull down Apple AAPL and its digital suppliers like today’s Bear of the Day, Western Digital WDC . Crude oil prices continue to lag, down another 1% or so on both WTI and Brent indexes. And fresh quarterly earnings results from retailers this morning is not helping matters.

Apple is only the most recent FAANG stock being taken down to correction levels (20% off its bull-market highs), following Facebook FB , Netflix NFLX and Amazon AMZN , which have already reached that inflection point. Questions relating to China’s economy – one of Apple’s most important markets – are keeping AAPL share growth snuffed for now, with shares down another 3% ahead of today’s opening bell.

Housing Starts for October haven’t helped, either. While we saw a rebound in new home building last month, the 1.228 million seasonally adjusted, annualized units rose 1.5%, nearly 100 basis points beneath expectations. A dearth in single-family homes continues to weigh on this market, down 1.8% month over month and -2.6% year over year. Only increases in the multi-family segment are buoying these headline figures; single-family homes are too expensive for new buyers to enter the market, for myriad reasons.

Building Permits fell roughly half a percentage point to 1.26 million seasonally adjusted annualized units. September totals, however, bumped up from the originally reported 1.24 million to 1.27 million. Building permits are a proven forward indicator of future starts.

Big-box major Target Corp. TGT has sunk 12% in pre-market trading on its bottom-line Q3 miss this morning, although revenues of $1.82 billion outperformed the expected $17.59 billion in the Zacks consensus. Earnings actually grew 20% year over year to $1.09 per share, but the bear-market climate right now is taking most, if not all, companies unfortunate enough to be reporting this morning out to the woodshed. For more on TGT’s earnings, click here.

Best Buy BBY also topped expectations ahead of today’s open, posting 93 cents a share compared to the 85-cent estimate. Sales in the quarter of $9.59 billion surpassed the Zacks consensus slightly, as well. Yet we see a 2.5% sell-off in the pre-market here, despite an overall healthy retail market heading into holiday shopping season. For more on BBY’s earnings, click here.

And Kohl’s KSS outperformed analyst estimates by 2 cents to 98 cents per share, on revenues of $4.63 billion that beat expectations slightly and were up notably from the $4.33 billion in the year-ago quarter. Shares are selling off 10% in the pre-market bloodbath, however, giving up a third of its gains year to date. For more on KSS’ earnings, click here.

Of course, nobody’s particularly happy about all the red ink this morning, but we are seeing some alleviation of the pressure to raise interest rates by the Federal Reserve. Odds for a December rate hike of another quarter-percent has melted from about a 90% possibility to around 3/4 this morning. And instead of looking toward another 3 or 4 hikes in 2019, currently the market only has one priced in at present – not in March but in June.

Mark Vickery

Senior Editor

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Western Digital Corporation (WDC): Free Stock Analysis Report, Inc. (AMZN): Free Stock Analysis Report

Netflix, Inc. (NFLX): Free Stock Analysis Report

Facebook, Inc. (FB): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

Best Buy Co., Inc. (BBY): Free Stock Analysis Report

Target Corporation (TGT): Free Stock Analysis Report

Kohl’s Corporation (KSS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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