The stock market was mixed on Friday morning as investors tried to parse all the factors affecting various companies in the current economic environment. As more people anticipate getting $1,400 stimulus checks from the federal government in the coming days and weeks, market participants are trying to guess which industries are most likely to benefit from American families having more cash on hand. However, concerns about high-growth stocks once again weighed on certain sectors of the market. As of 11:30 a.m. EST, the Dow Jones Industrial Average (^DJI 0.53%) was higher by 136 points, pushing further into record territory. However, the S&P 500 (^GSPC 0.28%) was down 17 points to 3,923, and the Nasdaq Composite (^IXIC 0.40%) had fallen 164 points to 13,235.

The retail industry has been hit hard by the COVID-19 pandemic, but many investors have gotten increasingly optimistic that vaccines and other efforts will bring a huge recovery for the industry once the economy reopens fully. That's sending a lot of retail stocks sharply higher on Friday, and retailers are hopeful they can capitalize on pent-up consumer shopping demand.

Shopping mall seen from top floor, with escalators.

Image source: Getty Images.

Big moves in retail

A large number of retail stocks were moving higher on Friday. Among them were the following:

  • Nordstrom (JWN -2.90%) saw its shares rise more than 10% Friday morning. The high-end department store retailer got favorable comments from analysts at Jefferies, which argued that the company is effectively using data to create a personalized and localized experience that matches with shoppers coming back to stores and using its online portals.
  • Macy's (M -11.73%) picked up 8%. The same analysts are pleased to see the department store giant finding ways to use its vast store network to fulfill online orders at the same time that it boosts its digital presence for e-commerce.
  • Victoria's Secret and Bath & Body Works operator L Brands (BBWI -1.45%) climbed 9% in the wake of its release of updated guidance for the first quarter of 2021, including a boost of $0.20 per share in earnings to a new range of $0.55 to $0.65 per share. L Brands is also reinstating its $0.15-per-share quarterly dividend starting in June.

Other retailers rose in sympathy. Designer Brands (DBI -3.40%) picked up 8%, for example, while Urban Outfitters (URBN -1.89%) settled for a 5% rise.

The arguments for and against a retail recovery

It's easy to understand why investors are excited about retail. For more than a year, most retailers have struggled with not being able to open their stores to full capacity, and many shoppers have stayed home. The companies above and just about every other retailer in the industry have done their best to beef up their e-commerce channels, and nearly all of them have seen big rises in online shopping. However, it hasn't always been enough to make up for the loss of in-person store visits.

If the pandemic is finally under control in the months to come, then it could bring with it a surge in spending activity. Moreover, $1,400 stimulus checks should put even more buying power into people's pockets, further boosting the stimulative effect and working in retailers' favor.

However, there are a couple of reasons for caution. First, even before the pandemic, Macy's, Nordstrom, and many of their peers were dealing with less interest in people shopping traditionally through store visits. The high costs of maintaining store networks put them at competitive disadvantages to e-commerce specialists with capital-light models.

Moreover, some retail stocks are getting pricey. L Brands is now trading at levels last seen in 2017 and has nearly tripled from its levels at the end of 2019, before the pandemic. Designer Brands hasn't seen that big a bounce, but it's still trading at levels higher than in January 2020.

Be careful out there

Retail stocks have had a rough ride, and it's nice to see them back on track. However, even once people stop worrying about coronavirus, there are still other obstacles that could stop retailers from seeing a full recovery.