Better than ever?
Wall Street seems to think so — or at least wants it to be true very badly.
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The signs of the COVID-19 damage are everywhere. Macy’s Inc. posted a first-quarter net loss of $652 million Tuesday morning while Signet Jewelers said it would permanently close nearly 400 stores this year.
And while shares of both of those companies fell for the day, the broader stock market is betting on something better than the worst-case scenarios suggested by the surge in unemployment, bankruptcies and comparisons with the Great Depression.
Stocks react to day-to-day changes at companies — and often with brutal efficiency — but the stock market overall is a forward-looking bet on where the economy is going.
Individual stocks in fashion are swinging wildly, reflecting some of the craziness in the market.
Iconix Brand Group Inc. shot up 62.4 percent to $1.77, and Lululemon Athletica Inc., inched up 0.4 percent to $316.40 on Tuesday while TJX Cos. Inc. slipped 2.1 percent to $56.24; Macy’s Inc. dropped 7.1 percent to $8.87; Signet fell 16.2 percent to $14.16, and Fossil Group Inc. declined 37.9 percent to $5.03.
The Dow Jones Industrial Average closed down 1.1 percent, or 300.14 points, to 27,272.30 on Tuesday, but is off just 3.4 percent from the start of the year.
Certainly, the world seems more than 3.4 percent different than at New Year’s.
Investors are also easily swayed by the elixir of low interest rates and mollified by the trillions of dollars Washington has pumped into businesses to prop them up when the coronavirus sent people home in mid-March.
Simeon Siegel, an analyst at BMO Capital Markets, said investors are worried they’ll miss out on the rally and working with imperfect information — and trying to square everything with concerns that a second wave of COVID-19 infections could come.
“Everyone is taking trends that they see today and trying to extrapolate them to the future in a period where it’s simply not doable,” Siegel said. “T.J. Maxx stores are not going to be shut forever. By the same token, people are not going to be buying home fitness and home office furniture forever. The pandemic will not last forever and will also not absolutely disappear.”
He said the market would see “rather than a reversion to the mean, a reversion away from the extremes” where “the stronger trends will get weaker and the weaker trends will get stronger.”