The Daily Dose: Telling Moves in Retail

 | Jul 01, 2014 | 10:00 AM EDT
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Pundits and analysts are quietly pitching this week as "slow" due to the July 4 holiday and Thursday's shortened session.

Don't be fooled. We've seen at least two disappointing economic reads in the past two weeks -- aside from gross domestic product, that is. The Chicago Institute for Supply Management manufacturing index missed the consensus estimate for June, and fell vs. May, and personal spending declined after adjusting for inflation. I found this activity to be worrisome, given that the market is positioned for a material reacceleration in domestic economic growth in the second and third quarters.

Then there's the earnings warning from DuPont (DD), as well as some telling conversations I've been having with execs ahead of earnings season. If all this is any indication of what lays ahead, you might want to consider lightening up a bit on long positions. In the meantime, maybe discuss with your team (or with yourself) possible reasons for why the Dow Jones Transportation Average has been lagging.

Dow Jones Transportation Average -- Daily
Source: Yahoo! Finance

Is this due to a rotation into risker assets, as seen in numerous sector performances in June and via the CBOE Volatility Index (VIX)? Or, alternatively, is it something more profound? For instance, is the market growing concerned on the state of the economy into autumn?

Stock Stories of the Month

You would be surprised by the stories that stock prices tell. Each day the market does its best to try predicting the future of a company. After some 30 days of action, a stock price could say a ton about the next earnings report.

Here are seven surprising one-month stock moves in the retail sector that are worthy of your attention as we near second-quarter earnings season.

Target (TGT) shares have risen 2.4% in the past month, outperforming both the S&P 500 and the Dow. The read: The market may be positioning for a decent back-to-school season at Target, driven by more aggressive promotions and marketing, which could bring people back to the store following last winter's data breach and preclude any further earnings warnings. The market may also be demonstrating a belief that management upheavals have concluded -- and that interim CEO John Mulligan may ultimately be confirmed as the company's official CEO before the holiday season.

Abercrombie & Fitch (ANF) shares have gained 13% in four weeks, which is impressive. My read on that move: The market believes this will be Mike Jeffries' last holiday season as A&F CEO, and that business will improve in 2015 as the company forms a division-president structure -- that is, one person to head up each division. Mind you, I am lukewarm on going anywhere near special-apparel stocks. The industry margin compression has shown no sign of abating.

Bebe (BEBE) and New York & Company (NWY) shares have plunged an average of 14% in the last month. Wow. The only read here: Per the market, neither company may be a viable entity in the longer term as H&M and Forever 21 open more stores and cause further margin compression throughout the apparel industry.

TJX (TJX) and Ross Stores (ROST) shares have declined some 3.9% and 3.1%, respectively, in one month's time. This may seem little strange, but it isn't really. Each company is cycling very strong profit gains from the second quarter of 2013, meaning growth is set to be slower this time around. Each company will have to show to the Street it could reaccelerate its growth rate as consumers splurge a bit more.

Best Buy (BBY) shares, meanwhile, have rocketed 19% in the past month. The read: The market is, at long last, appreciating strength in the company's online business -- as well as Best Buy's potential for a good holiday season due to new home­-theater-shop rollouts.

At the time of publication, Sozzi had no positions in the stocks mentioned.

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