All Eyes on Retail Stocks for Black Friday

What’s happening: Investor focus will remain on US retail stocks today, even after the rally on Wednesday ahead of the great Thanksgiving shopping week.

What happened: Black Friday kicks off the all-important US holiday shopping season. Investors are eager for reports on how retailers fare on Black Friday and Cyber Monday, with this being the first real indicator of their expected performance in December, a month that generates almost 20% of total annual revenues for retailers.

While households look forward to attractive Black Friday deals, investors will be on the lookout for the best retails stocks to invest in the holiday season.

Why it matters: While shoppers may not be camping outside popular retail stores waiting to grab the best bargains this year, there has already been a surge in online shopping by Americans. Investors have added retail stocks to their portfolios and sentiments remain bullish about massive Black Friday and Cyber Monday sales, despite the resurgence of covid-19 cases in many parts of the country.

The NRF (National Retail Federation) recently said it expects holiday sales to increase between 3.6% and 5.2% in November and December, despite the current economic crisis. The agency also projected holiday spending between $755.3 billion and $766.7 billion this year.

With holiday shopping growing by an average 3.5% every year over the past five years, markets expect 2020 to be no different, other than the sales being generated online. While Verizon's Business Retail Trends data shows an 82% spike in online shopping traffic through the first week of November this year, the NRF has projected a 20% to 30% increase in online and non-store sales this holiday season.

Amazon is likely to be among the main beneficiaries of this trend. The ecommerce giant, which had hired more than 25,000 people across its warehouses earlier this year, has added another 100,000 seasonal workers for the shopping season. Retailers that have recently expanded their online presence, like Walmart, Target and Home Depot, may also benefit from the higher sales.

Investors have extended their support to other ecommerce stocks like eBay and Etsy, expecting them to report high holiday season sales this year. In fact, some mall-based retailers, like Macy’s and American Eagle Outfitters, also saw their stocks spiking on Wednesday.

Investors are also focusing on some stocks outside retail. Delivery companies, like FedEx and United Parcel Service, as well as online payment processing firms like PayPal, may also benefit from the surge in online sales.

What to watch: Investors will keep an eye on the sales during Black Friday and Cyber Monday. Markets will also monitor how well the retailers handle the incoming swarm of orders and execute on services like curb-side pickup and expedited deliveries.

European stocks will be in focus today ahead of the economic reports from the region.

Context: European equities ended almost flat on Thursday amid light trading volumes as US markets remained closed for Thanksgiving.

Details: Markets in Europe took a pause after a rally in the previous sessions driven by encouraging covid-19 vaccine news.

European stocks have surged significantly in November, with investor sentiment being boosted by breakthroughs in coronavirus vaccine development. Rising hopes of a faster economic recovery have driven gains in the most-impacted cyclical and value sectors. The Stoxx Europe 600 Index is already up 14% for the month, and all set to deliver record monthly gains.

Investor sentiment was dampened, however, by reports of German Chancellor Angela Merkel considering extending the current restrictions till early January to contain the spread of the virus. Investor preference for value stocks reversed on news of a surge in covid-19 cases globally, following which tech stocks came into focus.

The Stoxx Europe 600 edged lower by 0.1% on Thursday. While technology and healthcare stocks were among the top performers, energy shares lost significantly.

What to watch: Investors will be keeping a close eye on economic data from the Eurozone including the consumer confidence and economic sentiment indicators. The consumer confidence indicator is expected to decline to -17.6 in November, from a previous reading of -15.5, while the economic sentiment indicator might drop to 86.5, from 90.9 in the prior month.

Covid-19 continues to remain one of the major concerns for markets, with total cases surging past 60.8 million worldwide.

Other Markets: US indices closed mostly lower on Wednesday, with the Dow Jones index and S&P 500 down by 0.58% and 0.16%, respectively, and the Nasdaq 100 rising by 0.48%.

UK’s Nationwide House Price Index, France’s GDP growth rate and inflation, Italy's manufacturing confidence index and consumer confidence index, Spain's industrial confidence indicator, Brazil’s unemployment rate, India’s GDP growth rate as well as Mexico's balance of trade.

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.