As Cyber Monday rolls around, how can we expect to see the stock market react? As consumers take advantage of Black Friday and Cyber Monday deals, retailer stocks are looking up. A strong sales forecast over this weekend can boost retailer stocks.
Last week gave an indication of how the holiday weekend would perform. Dow Jones Industrial Average is up a record breaking 0.2%, S&P 500 futures have gained 0.3% and Nasdaq has risen 0.6% at the end of last week. Cyber Monday is typically the greatest single-day shopping event in the year with 2019 sales hitting $730 billion in the US. So let’s see how retailers perform.
Black Friday is often used by investors to see how retail stocks are performing with this year being especially important to identify those retailers that will bounce back from the pandemic caused recession. Investors look for consumers to spend lavishly over the weekend to see whether a return to high consumer spending will feed economic recovery. A strong performance over Black Friday and Cyber Monday would help confirm the start of a rebound.
E-commerce should particularly benefit from this year’s holiday shopping season. Covid has changed the way people shop, with more and more people choosing to shop from the comfort of their own home to avoid the deadly virus. The pandemic has pushed consumers to substitute in-person shopping habits to buying online with e-commerce performing well through the pandemic. Adobe Analytics predicts 2020’s Cyber Monday to be the best performing yet with a year-on-year growth at 15-35% with a report over the last few days indicating a 21.5% year-on-year growth. This would do wonders for the retail sector who have struggled with more conservative buying habits and covid restrictions putting many companies in the red. Today, Topshop owner Arcadia announced insolvency due to the effects of the pandemic. Will holiday shopping save some retailers?
Effect of Black Friday
Black Friday is a crucial yearly event for retailers where sales traditionally push them into the black for that year. Sales over Black Friday also provide key insights into the health of the retail industry and the rate of growth that can be expected in the current climate.
Black Friday also affects the stock market by having extra days off with higher trading activity seen the days preceding these seasonal events. This phenomenon is known as the holiday effect and is a great opportunity for traders to make a profit.
Whilst retailers steal the focus of stock market news it might be worth looking at other sectors that have benefited from the vaccine announcements. The energy sector, which was this year’s biggest loser, is up 33.8% this month as the end of the pandemic is in sight. Financials, industrials and materials has also seen a benefit, up 13% over November and small-caps such as the Russell 2000 rallying 20.6% this month, possibly proving its best month ever.
Performance of retailers this holiday weekend will indicate how the economy will bounce back from the pandemic-induced recession. Keep up with the latest stock market news by following BullBear.