The flood of consumer savings from COVID is drying up, and so are the retailers who were wading in it.
The Wall Street Journal
Kohl sales declined 5% for the quarter from a year earlier. Macy’s reported a surprise loss. Welcome to the end of the bull market which we recognized as beginning ending November 2021-January 2022. The first ‘wave’ down ended October 2022. The corrective Wave 2 rebound ended in late July. The next down phase has begun.
Consider how the market punished these retailers. In one day, Macy is down 14%, Nordstrom’s down 10%, Dick’s Sporting Goods down 24% (yes in one day) and Foot Locker down 28%. This is how bear markets begin. A month ago things looked great, now, not so much.
Previously, we identified July 27 as top timing for the rebound. The DJIA has fallen from 35,600 to 34,099. Today the hot NDX 100 had an outside reversal day, a technical sign meaning a new high and then a new low ‘outside’ the previous day, signaling lower prices ahead.
Our most reliable indicator is the New York Stock Exchange Advance Decline line. It peaked, yes, just after July 27. It has now turned down. As this is a general interest newspaper, let’s just say numerous other indicators have done the same, turned down.
Our proxy stock for the market is Cullen Frost CFR bank. It peaked at 119 July 27 (rounded) and has already fallen to 95. This is an example of how a firm earning millions of dollars gets thrown into the bear camp. The regional bank index KRE has had a wave one down and two up, now falling from 62 to 44. Silicon Valley and Signature bank failures were the early warning signs of trouble. The bear market will spread to the rest of the banking sector.
The obvious indicator is the short-term interest rates. Jerome and Janet are dreaming if they think they are in charge. This year that 3 month rate rate has risen from 4.2% to 5.3%, a 26% increase. A thirty-year fixed mortgage is 7.31%, the highest since 2000. This, as noted in previous columns, will take more and more of what might have been invested capital, as firms roll over older loans and pay higher interest rates.
West Texas Intermediate has bounced off its 200-day moving average just under $70. Today it is $79. Higher prices lie ahead. Unleaded gasoline futures bottomed at $2.00 and have advanced to $2.58. Higher gasoline prices also lie ahead.
