The Grinch could be a short-seller this holiday season.
Retail stocks rallied across the board on Thursday as a much worse-than-expected November retail sales report early Thursday, coupled with Wednesday’s latest announcement from the Federal Reserve, put markets under heavy selling pressure.
By early afternoon, shares of Macy’s (M) were down 3.9%, while shares of Target (TGT) and Abercrombie & Fitch (ANF) were down more than 4%, among other notable names that underperformed in the retail space.
The VanEck Retail ETF (RTH) — which counts Amazon, Home Depot and Walmart as its top three holdings — lost 2.5% in afternoon trading. The SPDR S&P Retail ETF, XRT, was down 3%.
These moves also come during a breakout in the stock markets, with the Nasdaq falling as much as 3% in early afternoon trading.
But this investor caution regarding retail in particular seems misplaced following this morning’s latest retail sales data.
The government’s retail sales report showed Thursday morning that spending fell sharply in November as the main Christmas shopping season kicked into high gear.
Retail sales fell 0.6% from the previous month.
Most retail sales saw declines in sales, particularly consumers of discretionary items have retreated amid higher prices and a slowing economy. Online retailers, general merchandise and clothing stores all reported declines in sales.
This poor retail sales assessment has increased investor fears that retailers could end the important holiday season with excess inventory, which will squeeze profit margins and lead to a lackluster fourth quarter.
“The headwinds of the past year are catching up with consumers and forcing them to be more conservative in their Christmas shopping this winter,” Morgan Stanley economist Ellen Zentner warned in a customer note.
“While last year consumers rushed to buy gifts early due to low inventories, this year 70% of consumers are waiting for discounts before starting their Christmas shopping. As a result, holiday spending in November/December is likely to be softer with more purchases.”
Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.
Click here for the latest stock market news and in-depth analysis, including stock-moving events
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow up Yahoo Finance Twitter, Facebook, Instagram, Flip board, LinkedInand YouTube