What happened

Shares of Five Below (FIVE -2.96%) were up 11% at 10:30 a.m. ET on Thursday even though there wasn't any news directly related to the company. In reality, the stock has been at the mercy of market sentiment toward retail stocks in recent weeks. And today, investors are rethinking their recent pessimism.

So what

In recent weeks, retail giants like Target, Walmart, and Costco have reported quarterly financial results. And investors have looked at those reports and have grown increasingly pessimistic about the retail sector because of inflation and the possibility of a recession.

To be fair, earnings per share (EPS) for these three retail giants did temporarily fall during the last major recession, even though revenue held up well, as the chart below shows.

TGT EPS Diluted (TTM) Chart

TGT EPS Diluted (TTM) data by YCharts

However, other retail chains are coming out with surprisingly strong results today, including Macy's, Dollar General, and Williams-Sonoma. Results from these companies have investors remembering that they can't throw the baby out with the bathwater -- while they all face similar challenges, companies need to be evaluated individually.

Before today's rally, shares of Five Below were down 30% in just the past month on this negative market sentiment. So it's not surprising to see it gain a little ground back today as investors turn more optimistic.

A Five Below employee stands in a store.

Image source: Five Below.

Now what

As a reminder, nothing has changed with Five Below since it reported full-year 2021 financial results on March 30. The company doesn't report results for the first quarter of 2022 until June 8.

When Five Below last reported, it outlined a plan to more than double its EPS by the end of 2025. In my opinion, the plan could potentially make this a market-beating investment. To be fair, it's possible that macro-economic conditions could cause management to walk back this goal when it reports Q1 results. It's worth watching. But for now, Five Below's stock price is simply getting batted around because of market conditions and not because of underlying business fundamentals.