It's Thursday, two days after the stock market's big 4% one-day plunge -- and the good news is that while stock markets in general look "mixed" today (some averages up, others down), one sector in particular is showing surprising strength: cruise stocks.
In late-morning trading, shares of all three of the major U.S.-based cruisers are on the rise. So far, as of 10:55 a.m. ET, we're seeing Norwegian Cruise Line Holdings (NCLH 7.53%) up 3%...
Royal Caribbean (RCL 3.04%) rising 3.4%...
and Carnival Corporation (CCL 4.65%) leading the whole pack higher with a 3.5% gain.
Crazy as it might sound, you can thank the U.S. U.S. Bureau of Labor Statistics (BLS) for that.
As you'll recall, back on Tuesday the BLS announced that inflation had inched up 0.1% sequentially in August, rising to 8.3%. But in very specific segments of the economy -- that happen to be important to cruise stocks -- prices actually moderated.
Take the price of airplane tickets, for example, air travel being the means by which so many cruise vacationers reach their initial ports of departure. According to BLS figures, airline fares declined 8.8% between July and August, making it cheaper, and more attractive, to take a cruise vacation. And Thursday's retail sales report (up 0.3%) provides some evidence that consumers are still willing to spend.
And consider the cost of fuel oil -- a crucial expense for cruise stocks, making up as much as 20% of their operating costs every year. Fuel oil didn't fall as much as the cost of gasoline (which incidentally offers travelers another route to departure ports). But fuel oil did decline 5.9% between July and August. That's going to lower cruise companies' operating costs -- and perhaps lessen their losses this quarter.
That's the good news for cruise stocks this week. Now here's the bad:
Investors may be reacting to the July-to-August improvement in cruise stocks' fortunes, but if you step back and take a big-picture view, things still look pretty grim for the cruise industry. Month over month, the cost of taking cruises and the cost of providing cruises both got a little bit lower, but the change from last year still looks strongly negative for cruise stocks.
Between August 2021 and August 2022, you see, airline fares didn't drop at all, but actually rose 33.4%, according to BLS data. And between August 2021 and August 2022, the cost of the fuel oil that cruise companies burn to keep their cruise ships going increased...68.8%!
Suffice it to say that the higher price of fuel oil in particular is still going to keep on hurting cruise companies' profits in 2022. And when you combine higher operating costs with the higher cost of paying interest on cruise companies' combined $74.2 billion debt load, the end result is still going to be continued losses for each of Norwegian Cruise, Royal Caribbean, and Carnival Corporation through the end of this year -- and probably into Q2 2023 as well.
Given that likelihood, I'd be looking at today's rally in cruise stock prices as a chance to exit the stocks rather than to jump on board.