What happened

Shares of retail stocks were falling again on Wednesday as the specter of a recession spooked investors once again. A number of economic data points pushed stocks lower, including a weak ADP payroll report for September. That followed a report on Tuesday from the Institute of Supply Management that showed manufacturing activity contracting for the second month in a row, hitting a 10-year low. Both reports added to fears of a potential recession and a trade war with China.

Retail stocks, already among the most vulnerable on the market, took a hit since they are sensitive to consumer spending and macroeconomics, especially heading into the holiday season, the most important time of the year for the industry.

On a day when the S&P 500 lost 1.8%, the SPDR S&P Retail ETF (NYSEMKT:XRT) gave up 2.8%. Among individual retail stocks, some notable losers were Best Buy (NYSE:BBY), which lost 4.3%; Macy's (NYSE:M), down 5.8%; Kohl's (NYSE:KSS), which gave up 5.7%; Nordstrom (NYSE:JWN), which closed down 5%; and Michaels Companies (NASDAQ:MIK), which fell 10.7%.

A blurred image of shoppers moving up and down an escalator in a mall

Image source: Getty Images.

So what 

All the retailers listed above are directly threatened by the rise of e-commerce, and most of them have struggled this year, especially the group of department store stocks.

This morning, ADP, the country's biggest payroll processor, said that employers added 135,000 jobs in September, below estimates at 152,000, and the company also reduced its estimate for August, saying that just 157,000 jobs were added, down from the earlier report at 195,000. 

That news, which precedes the official employment report from the Labor Department on Friday, combined with the weak manufacturing numbers and other data -- including a decline in car sales -- showing a weakening U.S. economy to cause the retail sell-off.

Retailers like the ones above are already struggling to generate sales growth even in one of the strongest economies on record. Slowing manufacturing growth also led some investors to believe that the trade war is starting to have a measurable effect on the economy, and will trickle down to the consumer level. Meanwhile, retailers are vulnerable to an increase in tariffs and any retaliation from China.

As far as company-specific news about the retailers above, there was little today. Best Buy recently announced a new focus on healthcare, specifically for seniors. Macy's shares approached a 52-week low today, following news from a few days earlier that the company will close its downtown Seattle location after the holidays and sell the building, in keeping with its real estate optimization strategy.

Kohl's stock is also near 52-week lows, though investors are hopeful that its newly companywide partnership with Amazon.com will help drive growth. Nordstrom is prepping for the big opening of its new flagship store in Manhattan, and Michaels had been on the upswing following improving trade news at the end of August, but today's sell-off shows that the stock's volatility isn't going away.

Now what 

The retailers above won't report earnings until November, so investors won't get an update for a number of weeks. But other retail earnings reports do come out at odd intervals. Bed Bath & Beyond (NASDAQ:BBBY) posted its second-quarter report after hours, saying that comparable-store sales fell 6.7%. The home goods retailer has been notoriously troubled, but nonetheless that news is not a good sign for the broader retail industry, especially its struggling peers.

With the official labor report set for Friday and the market already feeling jittery, expect the volatility in retail stocks to continue.