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Why Sears Holding Corp Stock Was Rising Today

By Jeremy Bowman – Apr 10, 2018 at 3:05PM

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Shares of the struggling retailer got a boost after tensions with China over tariffs seemed to ease.

What happened

Shares of Sears Holding Corp (SHLDQ) were gaining, riding the broader market tide, as stocks surged today after Chinese President Xi Jinping eased his threats in the simmering trade war. As a struggling retailer, Sears has more to lose than most companies in a potential trade war as tariffs on Chinese goods could drive up prices on much of its merchandise. As of 3:22 p.m. EDT, the stock was up 7.5% on the news.

So what 

At a time when both the U.S. and China have been threatening to slap tariffs on each other, Chinese President Xi made a surprising move last night saying he plans to open up the country's economy by lowering tariffs on autos and other products and enforcing the legal intellectual property of foreign companies, which has been a major problem in China.

The exterior of a Sears department store.

Image source: Sears.

Retailers widely oppose tariffs as many of the goods they sell are imported from China, and even Sears could feel pressure from President Donald Trump's planned steel and aluminum tariffs as it could raise prices on items like appliances and car parts.

Now what

Sears wasn't the only winner in the retail sector today as the SPDR Retail ETF was up 2%, slightly outperforming the S&P 500. Sears stock has been beaten down so much that even a minor piece of good news like China's announcement can give shares a pop.

However, also today, credit-reporting firm Moody's said retail defaults hit an all-time high in the first quarter as nine of a total 28 corporate defaults were by retailers. In fact, Sears was one of the nine companies to default on its debt. The finding by Moody's shows the tenuous track that many retailers continue to walk. For Sears, which has been losing billions of dollars since 2010 and continues to see comparable sales plunge, bankruptcy may not be too far away despite today's gains.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Moody's. The Motley Fool has a disclosure policy.

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