As the holidays near, investors face a crucial question: Do they believe last week's bad earnings news from retailers, or are they banking on the generally solid economic data that normally points to a stronger season and might have shown up in some stronger retail earnings reports on Tuesday morning?
That question has raced through Wall Street since last week, as retailers such as Nordstrom and Macy's missed third-quarter profit forecasts and, more importantly, trimmed guidance for the holiday season when retailers can make the lion's share of their annual profit. The fears abated slightly when Wal-Mart Stores announced third-quarter results on Tuesday morning that modestly missed forecasts, though the forecasts had been revised lower when the world's largest retailer cut its own forecast last month.
Investors have been hating on many retail stocks — the S&P retail sector was down close to 9 percent last week — but Wal-Mart, Home Depot and TJX Companies were all rising on Tuesday morning on upbeat results.
If low prices and the dollar are primary culprits in holding down reported numbers from retailers, does Tuesday's trading action suggest the beaten-up retail sector could be the biggest early discount of the holiday season?