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New York
CNN
—
Weaker-than-expected retail sales in November pummeled market sentiment on Thursday and raised the odds that the Federal Reserve’s inflation-fighting interest rate hikes would push the economy into recession.
What’s happening: US retail sales, which measure the total amount of money that stores make from selling goods to customers, fell 0.6% in November, the weakest performance in nearly a year. The drop concerned economists who had expected monthly sales to shrink by just 0.1%. It’s also a sharp reversal from October’s sales increase of 1.3%.
That’s a bad sign for the economy. Just last month Bank of America CEO Brian Moynihan told CNN that the continued strength of the US consumer is nearly single-handedly staving off recession. Consumer spending is a major driver of the economy, and the last two months of the year can account for about 20% of total retail sales — even more for some retailers, according to National Retail Federation data.
Market mania: The weak report means that spending faltered just as the holiday season started, a critical time for retailers to ramp up profits and get rid of excess inventory. Investors weren’t too happy about that.
Shares of Costco
(COST) closed Thursday 4.1% lower, Target
(CBDY) fell by 3.2%, Macy’s
(M) dropped 3.5% and Abercrombie & Fitch
(ANF) was down 6.2%.
The entire sector took a blow — the VanEck Retail ETF, with Amazon
(AMZN), Home Depot
(HD) and Walmart
(WMT)as its top three holdings, fell by 2.2%. The SPDR S&P Retail ETF, which follows all S&P retail stocks, was down 2.9%.
Weak sales are likely to continue, say analysts, and if they do, then retailers’ bottom lines and fourth-quarter earnings will suffer.
“The headwinds of the past year are catching up to consumers and forcing them to be more conservative in their holiday shopping this winter,” warned Morgan Stanley economist Ellen…
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