Retail roars back | Kiplinger

Retail Roars Back, Markets Build Positive Momo 

The major indexes staged a second consecutive sizable rally Thursday amid a number of encouraging retail reports and more signs that perhaps the recent downturn was a touch overdone.

Michael Reinking, senior market strategist for the New York Stock Exchange, noted an important potential sea change in yesterday's trading – namely, Dick's (DKS) and other retailers reversed early losses and led the market higher. "That type of price action where stocks rally despite 'bad news' suggested that expectations, at least in the short-term, had been sufficiently reset," he says.

The retail industry then followed through Thursday with some straight-up good news. Discount retailers Dollar Tree (DLTR, +21.9%) and Dollar General (DG, +13.0%) both enjoyed double-digit pops on Street-beating earnings. The former, which also has Family Dollar under its corporate umbrella, earned an adjusted $2.37 per share last quarter to skate past calls for $2.00 per share, and raised its 2022 sales outlook to $27.8 billion-$28.1 billion from $27.2 billion-$27.9 billion previously. The latter topped earnings estimates by earning $2.41 per share (vs. $2.32 est.) and raised both its revenue and same-store sales guidance. Upscale home-goods retailer Williams-Sonoma (WSM, +13.1%) piled on with top- and bottom-line beats, as did Macy's (M, +19.3%), which also topped earnings and sales expectations and upped its profit forecast for 2022.

"The underpinning for today's market climb higher suggests that last week's doom and gloom about the all-important U.S. consumer might have been overdone, along with the dire recession headlines," says Quincy Krosby, chief equity strategist for LPL Financial. He acknowledges that data suggest the economy is slowing and that the Fed is poised to deliver at least two more 50-basis-point rate hikes, "but the notion that the consumer – 70% of the U.S. economy – is on a spending strike, is overblown as earnings reports coupled with positive guidance indicate otherwise."

Also help pushing stocks ahead were chipmakers Broadcom (AVGO, +3.6%), which announced a $61 billion deal to acquire virtualization and cloud firm VMWare (VMW, +3.2%), and Nvidia (NVDA, +5.2%), which cratered in Wednesday's after-hours trade after forecasting revenue deceleration in its second quarter, but rebounded in Thursday trade. They helped the Nasdaq (+2.7% to 11,740) take the pole position in today's rally, followed by the S&P 500 (+2.0% to 4,057) and Dow (+1.6% to 32,637).