Impact of high interest rates on retail sector, with varying stock performances

From Investing.com: 2024-06-16 09:10:56

Elevated U.S. interest rates are impacting the retail sector, with some stocks soaring while others struggle. The Consumer Discretionary Distribution & Retail index is up 14%, with Amazon up 21%. Lower-income consumer-focused companies like Dollar Tree and Dollar General have been hit hard, down 27% and 9% respectively.

The retail sector, along with real estate and consumer staples, are feeling pressure from high rates. The Fed is waiting for more signs of inflation easing before considering rate cuts. Gas and grocery prices are squeezing lower to mid-income consumers, affecting their spending power despite a strong economy.

Retail sales data will be closely watched next week, with expectations of 0.2% growth in May. Weaker-than-expected results could prompt the Fed to cut rates sooner. Futures markets anticipate a September cut, despite the Fed projecting one in December. Investors are eyeing companies with strong consumer support against high rates.

To combat the impact of high rates, investors are turning to companies like Walmart, Costco, and TJX Companies, which offer consumer value. These companies have seen share increases of 28%, 29%, and 16% respectively this year. Urban Outfitters has also performed well, up over 20% due to its strong fashion merchandise selection in an inflationary environment.

Online shopping companies like Carvana and DoorDash are thriving despite high rates. Carvana’s shares have nearly doubled this year, while DoorDash’s are up around 13%. Portfolio managers believe growth in these areas will continue, despite challenges in the overall consumer sector.



Read more at Investing.com: Retail stocks search for direction as rates stay high By Reuters