Green Shoots
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Key Takeaways

  • Retails Mixed Messages
  • Next Week’s Economic News in Focus
  • Key Levels and Volatility

The story of earnings season was arguably the mixed bag we saw in retailers. Target

TGT
and Walmart

WMT
kicked things off by scaring markets with their earnings and outlooks. Both companies gave pause for concern the economy may be headed toward a recession. However, higher end retailers like Nordstrom

JWN
and Macy’s offered much more positive news, possibly creating more questions than answers as to the state of the economy. Last night we again saw some mixed messages with Gap Stores missing and Costco, despite beating on sales estimates, saw their margins compress.

It seems the retail sector is a tale of two cities at the moment. Lower end retailers and those selling more trendy-type clothing seem to be struggling. However, retailers appealing to a slightly higher income shopper did better. We’ll put that theory to the test next week when Lululemon, a higher end athleisure wear apparel retailer reports.

As earnings fade into the rear view mirror, next week’s attention will turn toward a slate of economic data, headlined by the granddaddy of them all, Friday’s employment report. Markets are looking for an increase of 310K jobs and the unemployment rate to hold steady at 3.6%. Leading up to Friday’s report we’ll hear from the Fed’s Christopher Wallace on Monday followed by a host of data spread throughout the week that should offer good insight as to how the economy is fairing.

For retail investors, I think there are a couple things to keep an eye on. First, can the 4000 level hold in the S&P 500. We may be forming a base at these levels but next week’s data could put that level to the test. Second, despite this week’s rally thus far, VIX is still elevated and trading about 1.5x its historical average. A number that high continues suggesting the potential for more trading volatility.

In the meantime, let’s all take a deserved long weekend and most importantly, give thanks and a moment to remember those who have made the ultimate sacrifice to serve our nation.

tastytrade, Inc. commentary for educational purposes only.

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