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The death of retail is 'totally oversubscribed'

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Heidi Chung
·Reporter
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FILE PHOTO: A shopper looks at clothes on sale at a retail store located in a shopping mall in central Sydney, Australia, March 19, 2017. REUTERS/Steven Saphore/File Photo GLOBAL BUSINESS WEEK AHEAD SEARCH GLOBAL BUSINESS 8 JAN FOR ALL IMAGES
FILE PHOTO: A shopper looks at clothes on sale at a retail store located in a shopping mall in central Sydney, Australia, March 19, 2017. REUTERS/Steven Saphore/File Photo GLOBAL BUSINESS WEEK AHEAD SEARCH GLOBAL BUSINESS 8 JAN FOR ALL IMAGES

The S&P 500 (^GSPC) dropped more than 1% on Friday and fell into a correction, down 10% from its recent high, after seeing big swings in both directions over the past week.

Despite all of the turbulence, one group of equities held up relatively well against a tough tape: retail stocks.

While the S&P 500 tumbled 3% this week, the SPDR S&P Retail ETF (XRT) fell a modest 0.77% as of 2 p.m. ET. Shares of Walmart (WMT), one of the largest components in the XRT, jumped 1.35% in the past week as of midday Friday.

Walmart isn’t the only retail company standing strong amid the recent bout of volatility. Department stores Nordstrom (JWN) and Kohl’s (KSS) have both rallied this week. Shares are up 2% and 1.5%, respectively.

Doomsday and disaster scenarios

Amazon (AMZN), considered a huge threat to brick-and-mortar retail, reported third-quarter financial results after the bell on Thursday which weren’t as rosy as Wall Street analysts had expected. While earnings came in above estimates, revenue fell short, and more importantly, the company gave weak fourth-quarter guidance, which sent the stock tumbling 7% on Friday.

Many of the brick-and-mortar retail names seemed left for dead in 2017 as the e-commerce behemoth looked to dominate the space. However, Neil Dutta, Renaissance Macro’s head of economic research, thinks retail is still kicking. “All the doomsday stuff about Amazon taking over the world, and disaster scenarios for retail have already been priced into the market … Consumer spending is up 4%, and the death of retail is totally oversubscribed.”

Dutta notes that many brick-and-mortar names have adapted to consumers’ tastes. “A lot of companies are making their shopping experiences better in the stores, and that’s bringing back customers,” Dutta said. “While Amazon just puked, the specialty retail stocks have been holding up reasonably well … Perhaps this is a sign that the U.S. consumer is alive and well, and brick-and-mortar is doing a bit better these days.”

Heidi Chung is a reporter for Yahoo Finance. Follow her on Twitter: @heidi_chung.

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