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Consumer Sentiment Falls, and Shares of Wal-Mart Follow

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Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Thomson Reuters/University of Michigan final reading of consumer sentiment for October was released this morning and hit 73.2, down from 77.5 in September and the lowest final reading we have seen in 2013. But the market as a whole is shrugging off this number: As of 12:45 p.m. EDT the Dow Jones Industrial Average  (DJINDICES: ^DJI  ) is up 15 points, or 0.17%, while the S&P 500 has also gained 0.17% and the Nasdaq has risen 0.15%.

The downbeat consumer sentiment report and the fact that Procter & Gamble (NYSE: PG  ) didn't increase its guidance for 2014 are likely weighing on shares, which are currently down 1%. The company reported earnings this morning that met Wall Street's expectations, but it said earnings-per-share growth in the coming quarters will likely remain at 5% to 7%. This comes as other consumer goods stocks and P&G's competitors have been increasing guidance and reporting solid quarterly earnings. Investors shouldn't overreact to this news as materially the company is performing well.

Another Dow consumer goods company declining today is Wal-Mart (NYSE: WMT  ) with shares down 0.5%. This move could be caused by a number of things today, one of which may be a report that Dollar General is actually the lowest-cost store among the discount retailers. Kantar Retail conducted a survey that indicated Wal-Mart was $0.12 more expensive than Dollar General when comparing the total price of a basket of the same products at each store. Family Dollar was a close third, while Target's basket cost nearly 50% more than the top two stores.

The other reason is that (NASDAQ: AMZN  ) once again posted a great quarter in terms of revenue growth, which may be an indication that Wal-Mart is once again losing market share to the online retailer. Although Amazon is still posting a quarterly loss, the revenue growth is extremely impressive and many believe Amazon could flip the switch from growth to profit anytime it wants, but has maintained the growth strategy and thus shows a loss each quarter.

Wal-Mart's price moves today shouldn't concern any longtime shareholder, as the survey results were very close and unlikely to change many consumers' minds. As for Amazon, the company has been around long enough that the possible damage it could do to Wal-Mart is likely baked into the stock price. That doesn't mean one retailer is better than the other. When it comes to Wal-Mart and Amazon, it all depends on what you're looking for: stable, slow, consistent growth, or volatile, erratic, but possibly explosive growth. Neither one is wrong nor right; it just depends on what you are comfortable with.

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

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Related Tickers

9/27/2016 4:45 PM
^DJI $18228.30 Up +133.47 +0.74%
AMZN $816.11 Up +16.95 +2.12% CAPS Rating: ****
PG $88.36 Up +0.51 +0.58%
Procter and Gamble CAPS Rating: ****
WMT $72.33 Up +0.71 +0.99%
Wal-Mart Stores CAPS Rating: ***