American retailers and the resurgent uncertainty because of the US-China trade disputes have marred the record mood on Wall Street this week. The Dow Jones slipped Tuesday and Wednesday after the index closed over 28,000 points for the first time last Friday. The other two high-profile US stock market barometers, the broad S & P 500 and the technology-heavy NASDAQ composite also fell short of their highs, marked at the beginning of the week.
On Thursday, indices at Wall Street continued to weaken slightly in early trading. Analysts consider the setbacks to be a normal reaction to recent gains.
The optimism was fueled by hopes for progress in trade talks between the United States and China, dampening the fears of recession that was still prevalent in the summer. In addition, the Federal Reserve has lowered key interest rates and the third-quarter balance sheet season was not as bad as it was feared. On Wednesday, however, caused a stir, which questioned an agreement on the first phase of a trade agreement at the end of the year.
Nonetheless, the S & P 500 has been rated above average after price gains of around 24 percent this year. Based on the expected profits for the coming year, the index comes to a price-earnings ratio (P / E ratio) of 17.4, according to the information service Factset. Thus, the P / E is above the average of the past ten years of 14.9. The measure measures whether stocks are comparatively cheap or expensive. The higher the P / E, the higher are the expectations shown in the price and thus the risk of setbacks.
This became clear this week with the example of some retail shares. The share price of home improvement chain Home Depot , a member of the Dow Jones, fell on Tuesday sharply by more than 5 per cent, after the company reduced its profit targets. On Wednesday, the price fell by another 2 percent and recovered only slightly on Thursday. The price of the department store chain Kohl’s even fell on Tuesday by 19 percent, after the group had lowered the forecasts.
The weakness of the two titles weighed on the whole industry. Retailers are among the cyclical, that is, cyclically sensitive consumption values. These stocks were the highest-rated stock segment in the S & P 500 at just over 22 lbs. Home Depot was after Apple, the second largest contributor to the Dow Jones’ jump in price from 27,000 to 28,000. Even after the recent setbacks compared to the beginning of the year, the stock is still up almost 30 percent.
The recent rally at the Wall Street was driven by technology stocks – classic growth stocks that put investors above average earnings growth. Apple alone has been responsible for more than two-fifths of the Dow profits since July. The share of the iPhone manufacturer, whose business also heavily depends on the demand of private consumers, this year by about 67 percent in the plus.
Retailers are currently the focus of attention as a sentiment barometer, with two-thirds of America’s economy dependent on private consumption. The picture is not completely negative. For example, Walmart, the largest American retailer, reported increasing sales in similar stores and well-attended stores in the United States last week.
According to the US Department of Commerce, retail sales rose again in October following an interim decline in September. Now it’s time for the important holiday season, which begins with “Black Friday” at the end of next week – the day after the Thanksgiving holiday, where retailers bring specials.