What happened

Shares of GameStop (NYSE:GME), Hanesbrands (NYSE:HBI), and The Michaels Companies (NASDAQ:MIK), a handful of consumer goods and retail businesses, all jumped well over 10% Monday afternoon, with GameStop and Michaels topping 20%, after investors seemed encouraged by COVID-19 data and some states' plans to cautiously reopen parts of their economy.

So what

A likely driving force propelling the broader markets today was recent data from New York State. Gov. Andrew Cuomo announced the total hospitalization rate was essentially flat and that the death toll has continued to drop since its April 9 peak.

The improving trends have a small collection of states preparing to reopen parts of their economy with restrictions, part of a multiphase strategy to reduce social distancing while walking a fine line with keeping people safe and the spread of COVID-19 under control. The mere mention of states considering reopening parts of their economy sooner rather than later had shares of many hard-hit retail and consumer goods businesses jumping today.

GME Chart

GME data by YCharts.

GameStop could have had more direct reason to be rising after an activist investor group is asking for two seats in the boardroom in addition to dramatic changes to the company's business. The group, which consists of Hestia Capital Partners and Permit Capital Enterprise Fund, combine to own a large chunk of GameStop shares. The group wants significant cost cuts and management compensation more correlated to creation of shareholder value (check the stark comparison between GME stock price and director compensation).

A gaming computer setup

Image source: Getty Images.

The Michaels Companies was already dealing with headwinds from a shorter holiday season during the fourth quarter, and will now have to focus on improving execution and growth initiatives at a difficult time when COVID-19 is disrupting nearly all businesses. The company has adjusted by rolling out contactless, same-day delivery across the U.S. with the service launching in roughly 10 states. Management believes it has plenty of liquidity and financial flexibility to weather the COVID-19 storm.

Now what

Right now, companies are all in damage control trying to improve liquidity, slash spending, and come up with out-of-the-box ideas to offset the revenue lost from reduced foot traffic and store closings. Hanesbrands is an example: It reduced discretionary spending and executive pay, optimized its inventory, and leveraged its e-commerce business to its full potential. The company has roughly $1 billion in cash on hand and should have the supply chain and brand image to bounce back to relative normal financial results over time.

Ultimately, while this has been an opportunity for investors to hunt for shares of companies trading at a discount, it's a solid reminder that while broader markets will almost certainly rebound over time, not all businesses will have the liquidity to weather COVID-19. Do your due diligence digging into companies' balance sheets, their liquidity and financial flexibility, as well as any upcoming debt maturities that could provide an additional hurdle.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.