Earnings season follows a predictable pattern. Bank stocks report first; then big tech stocks weigh in. And now, late in earnings season, we hear from the retail sector. Investors were expecting strong numbers and, for the most part, retailers delivered.
However, for some retailers, this may become a “sell the news” event.
That’s because on August 16, before the big-name retailers reported, the U.S. Retail Sales Report showed a 1.1% decline in retail sales in July from June. So while retail sales for the last two quarters will be strong, investors are wondering if the sector is entering a period of slowing growth. Concern about the Delta variant perhaps bringing more restrictions to the retail sector adds to the concern.
However, sectors don’t move in lockstep. In every market, there are strong performers even in tough economic conditions. This was true during the pandemic. And it’s true in the recovery. Summer is traditionally a slower season overall for retail. The July numbers probably do not reflect all of the back-to-school purchases. And, of course, stores are already beginning to prepare for the holiday season.
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