What happened
Shares of Camping World holdings (CWH 0.36%), Signet Jewelers (SIG 2.16%), and GameStop (GME 2.43%), various brick and mortar retail chains, are all jumping at least 12% higher Monday as many stocks traded on the hopes of the economy reopening and a possible new discovery about the spread of COVID-19.
So what
There are a number of recent driving forces that have many travel, transportation, entertainment, and hotel stocks, among many others, moving higher. One development was a shockingly strong May jobs report when 2.5 million nonfarm payrolls were added, far better than the forecast for 7.5 million job losses. Another positive bit of news came from Cheesecake Factory, which noted its recently reopened stores had already recaptured about 75% of prior-year's sales. Even the beaten-down airline industry had positive news when American Airlines Group said it would boost July flights 75% compared to June.
All of those developments suggest that the economy could be prepared to rebound sooner rather than later. That's great news for retailers of all kind, especially brick and mortar retailers, such as Camping World, Signet Jewelers, and GameStop. There could be further reason for optimism Monday as World Health Organization officials announced COVID-19 patients without symptoms aren't driving the spread of the virus. Officials noted that asymptomatic spread can occur, but it's not the main way the virus is being transmitted. The reason this is important is because if asymptomatic spread isn't the main driver, that could remove the biggest reason for social distancing and thus provide a boost of energy to the economy.
Image source: Getty Images.
Now what
It's great news for brick and mortar retailers that there is life in the restaurant and transportation industries, and it's even better for the broader economy that asymptomatic spread might not be the driving force behind COVID-19. Camping World specifically seems to be in a good spot compared to most retailers, as many people are looking to the great outdoors as a vacation destination and an escape while still maintaining social distances. But Signet would benefit hugely from a return to store traffic, and GameStop would have a fighting chance in its stores, compared to gamers only ordering online or downloading content.
Ultimately, investors should take these pops and drops in stock price with a grain of salt and also understand that while the economy might be seeing light at the end of this COVID-19 tunnel, there will still be some brutal financial pain felt when companies report second-quarter results. But if recent developments hold true, it appears the worst could be behind us, and that's all investors need to hear for retail stocks to surge higher.
