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Amazon, J.C. Penney, and Michael Kors React Differently to Today's Economic Data

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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.

Economic data released this morning indicated that consumer spending rose 0.5% in November after jumping by 0.4% in October when compared to the previous month. Additionally, consumer income rose 0.2% in November after falling 0.1% in October. That gain was due to a strong private sector increase, while government pay only modestly rose.

This data is extremely important to demonstrating the health of the economy, as consumer spending makes up 70% of economic activity. Today's news gave investors the confidence to apush stocks higher and move the Dow Jones Industrial Average (DJINDICES: ^DJI  ) once again into uncharted territory. As of 1 p.m. EST, the Dow is up 81 points, or 0.51%, and has already set a new all-time intraday high at 16,315. The S&P 500 is up 0.56% and the Nasdaq has moved higher by 0.94%.

Although the consumer spending figures are strong, retail stocks are mixed today. Shares of J.C. Penney (NYSE: JCP  ) have soared 5%, while online retail giant (NASDAQ: AMZN  ) is up 0.4% and hot mid-to-high-end fashion designer Michael Kors (NYSE: KORS  ) is off by more than 4%.

Many market participants have said this holiday shopping season is extremely important for J.C. Penney and even may be a make-or-break period. With shares down 54% year to date, the struggling retailer needs a big win in the fourth quarter prove its longevity to stock investors and, maybe more importantly, bond investors, as the company may need to once again tap the debt markets in the future. The strong consumer spending and income gains may be a sign that shoppers have spent more than many previously predicted, thus giving J.C. Penney a fighting chance. But even if the company can produce this quarter, investors beware: this retailer has a long recovery ahead.

Meanwhile. the world on online sales just continues to grow larger, and Amazon is positioned to benefit the most from this change. With all the hype around the company lately the stock broke the $400 mark last week; today's move means that it will likely hold that level for now. Unlike J.C. Penney, it doesn't seem as if investors really need to see a big win from Amazon this shopping season, but it wouldn't hurt if they did. Amazon is a long-term growth story, and that is the only way investors should play this one.

Lastly, Michael Kors' big drop today seems unwarranted, especially with little news pertaining to the company. Trading volume is already at 6.48 million, while average daily volume is only 4.1 million. Given that shares are up 57.73% year to date, this move looks like big investor taking profits off the table before the end of the year. Investors shouldn't become too concerned with daily moves like the one we are seeing today.

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Related Tickers

9/23/2016 4:55 PM
^DJI $18261.45 Down -131.01 -0.71%
AMZN $805.75 Up +1.05 +0.13% CAPS Rating: ****
JCP $9.78 Up +0.02 +0.20%
J.C. Penney CAPS Rating: *
KORS $50.51 Up +0.40 +0.80%
Michael Kors Holdi… CAPS Rating: ****