The late-summer roller coaster ride continued on Friday as the S&P 500 fell 2.59%, representing the 10th time in the past 18 trading days that the index has risen or fallen at least 1% (which I classify as a "volatile" day). During that span, in which S&P was down 5.5%, there were three days the index was down more than 2%. We have not seen that happen since the late December 2018/early January 2019 period when the S&P experienced nine "volatile days" in the 14 trading days from Dec. 14 through Jan. 4. During that period the S&P was down about 4.5%. We can expect the volatility to continue as we remain spectators in the U.S. vs. China trade war tennis match.
Ironically, after showing signs of life on Thursday, retailers took on a lot of water on Friday. Among the big decliners was Dick's Sporting Goods Inc. (DKS) (-5%), Guess Inc. (GES) (-6%), G-III Apparel Group Inc. (GIII) (-7%), Chico's FAS Inc. (CHS) (-10%), L Brands Inc. (LB) (-9%), Michaels Cos. (MIK) (-6%), Nordstrom Inc. (JWN) (-7%), American Eagle Outfitters Inc. (AEO) (-5%), Citi Trends Inc. (CTRN) (-6%), Gap Inc. (GPS) (-5%), J. Jill Inc. (JLL) (-5%), Tilly's Inc. (TLYS) (-9%) and Urban Outfitters Inc. (URBN) (-5%).
Many names that prospered on Thursday gave some back on Friday
At Home Group Inc. (HOME) , which was up 13% on Thursday, was down 8% on Friday. Hibbett Sports Inc. (HIBB) , which put up decent results Friday morning, fell 11% after rising 5% in Thursday. Meanwhile, Foot Locker Inc. (FL) dropped 19% after posting disappoint results Friday morning, but that pullback was exacerbated by the China situation. I'm not sure Foot Locker deserved losing one-fifth of its market cap due to quarterly results.
You can't make this stuff up, and I have never seen anything like what's happening with retail right now. It has been clear for a long time that the landscape has changed dramatically due to online shopping, led by Amazon.com Inc. (AMZN) . It's clear that bankruptcies will continue, along with asset sales and perhaps some consolidation. That's just where we are in the life cycle of an industry that is being transformed away from brick and mortar. But tariff wars have added a whole new dimension to retail's plight, and perhaps some opportunities for those with the strongest stomachs to take advantage of the volatility.
Given the announcement of a trade deal with Japan and an apparent "softening" (at least today) of the situation with China, look for retailers to regain some of what they gave back on Friday. But if you are playing this for short-term gains, keep in mind it's a veritable roulette wheel, controlled by tweets and mass media coverage. It's a very different game than buying names due to the market overreactions that we saw two summers ago when so many were proclaiming the death of retail.
