What happened
Shares of many apparel and accessory retailers closed higher on Tuesday, after a widely watched measure of retail sales for May came in much higher than Wall Street had expected.
Here's where these companies' stocks ended the session on Tuesday, relative to their closing prices on Monday.
- Bed Bath & Beyond (BBBY) was up 15.2%.
- Capri Holdings (CPRI 2.10%) was up 8.2%.
- Designer Brands (DBI 3.54%) was up 12.5%.
- Gap (GPS 5.59%) was up 8.5%.
- Kohl's (KSS 1.03%) was up 9%.
- Macy's (M 0.44%) was up 6.3%.
- Nordstrom (JWN 0.68%) was up 12.9%.
- Tapestry (TPR 1.68%) was up 5.6%.
So what
Before the markets opened on Tuesday, the U.S. Department of Commerce reported that retail sales were up 17.7% in May from the month prior, an increase that was well ahead of analyst forecasts.
While May's retail total, $486 billion, was still well below pre-pandemic levels, the result adds to evidence that the economic impact of the COVID-19 pandemic likely peaked in April. Or put another way: the recovery was underway in May, and that recovery has probably continued into June.
That's good news for our stocks. Here's why.
Image source: Macy's.
Now what
All of the stocks on our list here are what we call consumer-discretionary stocks, meaning that their sales are driven by -- you guessed it -- consumers' discretionary spending. Put another way, while consumers generally can't postpone purchases of things like food and soap (what we call consumer staples), they can often put off buying new shoes or jeans or a bag -- or what we call discretionary purchases.
When the economy heads south, consumers tend to cut back on discretionary spending. The fact that discretionary spending increased in May versus April suggests that consumers were feeling better about the economy in May versus April.
That's a sign of recovery, and that's good news for investors in consumer-discretionary stocks.
