A real food fight breaking out over the September retail sales numbers. No hiding the facts: they were below expectations, which had already been lowered. Men's Warehouse, American Eagle,Target, Limited, Nordstrom, JC Penney lowered earnings; Kohl's said earnings would be at the low end of the range.
And don't sugar-coat Wal-Mart: they raised guidance, but their sales momentum was slower than expected. So why is most of the sector trading UP today? That's where the food fight comes in. Bulls make several arguments in favor of retail:
1) The sector is oversold and over-shorted; much of what we are seeing today is short covering.
2) Why short covering? Bulls argue that with the Dow and S&P at historic highs, and with retailers well below their historic highs, this is the right sector to rotate into.
3) But isn't the consumer slowing down? Maybe, but bulls argue that despite the macro headwinds (cooling housing market, turmoil in the credit markets, gas prices up 14% year-over-year) traders will want to own retail because of the Fed cuts, and because multiples have contracted.
Still, there are plenty of skeptics. The stocks have already come off their highs from earlier in the morning; many feel they will come down more as the day wears on.
Elsewhere, bears are besides themselves over the rise in the market and the downward trend in earnings. First financials, then some oil companies lower earnings, today retailers.
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