What happened
Shares of Amazon (AMZN -1.64%), Wayfair (W -8.36%), and Gap (GPS -3.83%) were all rising today as investors regained some of their optimism for retail stocks. Several retailers reported better-than-expected quarterly financial results recently that helped boost the share price of some retail stocks today.
As of 3:12 p.m. ET Amazon had gained 3.9%, Wayfair had jumped 10.9%, and Gap was up 12.3%.
So what
Retail stocks have been on a downward trajectory lately as investors have become increasingly worried that sky-high inflation and aggressive rate hikes by the Federal Reserve will cool down the economy and cause consumers to spend less.
Image source: Getty Images.
But some of those fears were erased today after Express and Dick's Sporting Goods reported their latest quarterly financial results, with both companies beating Wall Street's top- and bottom-line consensus estimates.
Express lost an adjusted $0.10 per share in the quarter, which was better than analysts' consensus estimate of a loss of $0.15 per share. Dick's Sporting Goods reported earnings of $2.85 per share, ahead of Wall Street's expected $2.48 per share.
Additionally, retailer Nordstrom reported sales in its recent quarter that outpaced analysts' average estimate. The company also raised its full-year outlook thanks to its strong first-quarter results.
The solid quarterly results from those three companies not only caused their share prices to spike, but also spurred investor optimism in other retailers today, including Amazon, Wayfair, and Gap.
Amazon's stock may have received an additional boost today as the e-commerce company opened its first brick-and-mortar clothing store today.
Investors were eager to hear some good news from the retail industry after disappointing results from Target, Kohl's, and Abercrombie & Fitch have caused stocks in the sector to plummet recently.
Now what
While Amazon, Wayfair, and Gap investors should be glad to see that some companies in the retail industry are doing well right now, they should also be prepared for more share price swings.
Gap will report its latest earnings tomorrow, which will give investors a clearer picture of how the company is managing any potential issues related to rising costs and inflation. Amazon and Wayfair investors will also want to keep a close eye on Gap's financial results to get a better pulse on the retail industry.
What investors need to be very aware of right now is that with inflation at a nearly four-decade high the Federal Reserve is committed to raising rates this year in order to get skyrocketing prices under control.
Today, the Fed released minutes from its meeting that occurred earlier this month, with officials indicating that they're committed to multiple 50-basis point rate hikes in 2022. Doing so will likely help tamp down inflation, but it could also cause a slowdown in the economy resulting in reduced consumer spending and lower sales and earnings for retailers.
