The stock market has struggled to sustain any sort of gains, and Tuesday morning, it appeared that Wall Street would once again let a minor market rally on Monday start to slip away. As of 8 a.m. ET, futures on the Dow Jones Industrial Average (^DJI 0.06%) were down 214 points to 32,968. S&P 500 (^GSPC -0.22%) futures had fallen 31 points to 4,090, and Nasdaq Composite (^IXIC -0.52%) futures had lost 122 points to 12,482.
A lot of buzz among stock traders has come from Amazon (AMZN -1.14%) and its recently completed 20-for-1 stock split. However, after continuing gains on Monday, the e-commerce giant is seeing its share price fall back downward in a manner that isn't unusual for post-split situations. Meanwhile, though, brick-and-mortar retailers Kohl's (KSS 4.53%) and Chico's FAS (CHS) are both moving sharply higher.
Image source: Getty Images.
Moving on from the splits
Shares of Amazon were down more than 2% on Tuesday morning. That wiped out the gains the company's stock had seen on Monday, its first day of trading after completing its split.
It's not uncommon for stocks to see heightened volatility in the weeks surrounding stock split announcements. Short-term traders look to take advantage of investor sentiment by buying up shares in the period leading up to the split. Soon thereafter, many of those traders sell the stock, especially if they've reaped considerable gains.
Yet those who focus too much on a one-day move can miss out on seeing Amazon's fundamental long-term business strength. The Amazon Web Services division has tapped into the massive market for cloud computing, playing into the digital transformation trend. Moreover, although shoppers might return to brick-and-mortar locations for a while as the pandemic's impacts fade, e-commerce has a steadily rising fraction of overall retail, and that trend is unlikely to reverse course. With valuations at uncommonly reasonable levels, Amazon looks more attractive than it has in a while.
Retail strength
Meanwhile, shares of a couple of retailers managed to avoid the overall market's dour fate. Shares of Kohl's were up more than 9% in premarket trading as the company approached a potential acquirer about buying the company.
Kohl's disclosed that it had started exclusive talks with Franchise Group (FRG) about a possible acquisition of the retailer. Franchise Group has offered $60 per share in cash for Kohl's stock, and Kohl's wants to give Franchise Group every opportunity to conduct due diligence and gather information in order to arrange for financing for a final deal. No deal has yet reached a formal agreement. The uncertainty explains why even after this morning's share price advance, Kohl's fetches only about $46 per share -- a bit over $0.75 on the dollar if you assume the two parties eventually reach a merger agreement.
Chico's, on the other hand, briefly rose nearly 10% in premarket trading before giving up most of those gains. The apparel retailer saw revenue jump 39% year over year to $541 million, powered by comparable sales gains of nearly 41%. The White House Black Market store concept saw the best performance with a nearly 65% rise in comps, while namesake Chico's stores posted 52% comps. The numbers meant that all of the Chico's lines now have sales above pre-pandemic levels in fiscal 2019, and it also reversed a year-ago loss with a solid profit of $0.28 per share. Combined with a favorable outlook for the fiscal second quarter ending in July, investors hope Chico's is turning things around.
