What happened

The market's whiplash continued today, with stocks giving back all of Tuesday's gains. Investors again pounded the retail sector, afraid that lockdown-style conditions keeping many Americans in their homes most hours of the day will torch demand for most retail products, except for food and other essentials. Some chains have begun to close their stores, to limit the spread of COVID-19 and because customer traffic has dried up. News that retail sales fell 0.5% also didn't help since it could be a sign that consumer demand was already starting to shrink before the coronavirus outbreak really began to hit.

As of 1:58 a.m. EDT today, among the retail stocks falling sharply were Lowe's (LOW 0.89%) and Skechers (SKX 1.38%), which were each down 15.1%; Wayfair (W -2.74%), which was off 20.1%; and Ollie's Bargain Outlet Holdings (OLLI 2.20%), which was down 26.7%. At the same time, the S&P 500 had fallen 6%.

A down arrow with a stock chart in the background.

Image source: Getty Images.

So what

Though there's a broad impact on most of retail here, especially in the consumer discretionary sector (since shoppers are shifting purchases to essentials), there were also individual news items pushing these stocks lower today.

Lowe's, the nation's No. 2 home-improvement chain behind Home Depot, received a downgrade from Goldman Sachs lowering it from conviction buy to buy, as analyst Kate McShane lowered her price target from $141 to $85. McShane said she expects Lowe's to experience volatility due to the coronavirus outbreak and said the company's e-commerce platform is not operating at full capacity as it's switching its infrastructure to the cloud. The pandemic is also sweeping the nation ahead of the spring home-improvement season, the busiest time of year for Lowe's, which could weigh further on its performance. 

Following in the footsteps of several other retailers, Skechers pulled its first-quarter guidance due to the COVID-19 epidemic and said it would close stores in North America and parts of Europe through March 28. Given the circumstances of the epidemic, it seems optimistic to think that stores won't be closed longer than that. 

Wayfair faces a similar dilemma to Lowe's with the spring home-improvement season on tap, except Wayfair is significantly unprofitable, and was forced to lay off staff last month. The online home-goods seller usually holds its biggest event of the year, the Way Day shopping holiday, in April, but that seems up in the air at this point. Even if it happens, consumers might not be looking to shop for new furniture, especially with so many still focused on stockpiling essentials like food and toilet paper.

Ollie's Bargain Outlet still has its stores open, and though it's a discount retailer, it still carries mostly discretionary items. And in the current crisis, Americans aren't interesting getting deals on candles and fishing gear.  

Now what

As the outbreak spreads and the impact of the coronavirus grows, the near-term forecast for retailers will likely get bleaker. No one knows how long or severe the crisis will be, but it has become clear that we're facing a pandemic whose economic damage is unprecedented in anyone's lifetime. 

Ollie's Bargain Outlet will report fourth-quarter earnings Thursday after markets close. I would expect the retailer to pull its guidance as other chains have, since the coronavirus pandemic has led to an economic shock and introduced a level of uncertainty into the retail sector that it hasn't seen in a long time.