Dangdang, Sears Holdings Rally As Stock Market Braces for Storm

Wal-Mart Stores also gains despite the Dow's lackluster performance and talk of a minimum wage increase.

Feb 12, 2014 at 6:08PM

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.

With another winter storm bearing down on the East Coast on Wednesday, Wall Street overlooked an unusual showing of political harmony on Capitol Hill today, as the Dow Jones Industrial Average broke its four-day winning streak. Congress approved an increase to the debt ceiling, which allows the U.S. to keep borrowing dough to pay its bills until March 2015 -- a date conveniently set after the midterm elections this November. As for Mother Nature, there's no telling what impact the impending ice storm will have on the economy, but if early power outages and cancelled flights are any indication, snow plowers and ski resorts should make a killing this season. Unenthused, the Dow lost 30 points, or 0.2%, to end at 15,963.

Although the Dow lost some ground today, the market was mixed, and the services sector ended marginally higher. Wal-Mart Stores (NYSE:WMT) also ended just barely in the black Wednesday, adding 0.2%. While there was probably a mad rush for flashlights and generators today, there are bigger events on the horizon for shareholders. January retail sales figures, as reported by the Department of Commerce, come out tomorrow, and should be a good barometer of consumer spending. Analysts expect sales to fall 0.1% from December, according to Bloomberg, so even a modest increase could be a big catalyst for Wal-Mart and its retail peers. The company also reports quarterly earnings next week, and investors should keep an eye on the politics of a minimum wage increase, which could dramatically affect Wal-Mart's labor costs if instituted. 

Although there weren't many big swings on Wall Street today, shares of E-Commerce China Dangdang (NYSE:DANG) ignored convention, as they often do, to jump 4.3% Wednesday. Shares of the $820 million Dangdang are nearly five times as volatile as the broader market, so swings like today's aren't unprecedented. Not surprisingly, investing in a small-cap Chinese Internet company isn't without its risks, and I'd be cautious of throwing my financial support behind the company until it actually turns a profit. While Dangdang's customer base increased by 21% in the third quarter, total orders only ticked up by 13%, meaning the average customer actually bought less than they did just a year ago -- troubling.

Lastly, shares of Sears Holdings (NASDAQ:SHLD) rallied 4.3% today, continuing a short-term rally that saw the stock surge more than 8% on Tuesday. Sears' gains should be considered in context, of course, as the department store chain isn't quite the corporate behemoth it once was; shares are down more than 50% in the last three years alone. The ever-more competitive retail environment is more cutthroat than it's ever been, and old-timers like Sears must either adapt or die. The company seems to be adapting: Sears showed its commitment to e-commerce and customer convenience earlier this week, announcing a new service that allows customers to place orders online and pick them up in-store without so much as exiting their car. Does the American consumer have to do anything anymore?

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John Divine has no position in any stocks mentioned. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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