Market Overview

Holiday Shopping Season 2012 Proves to be a Dud

The holiday shopping season of 2012 was disappointing for retailers, according to data released from MasterCard Advisors. Sales in the two months leading up to Christmas increased 0.7 percent year-over-year -- analysts had anticipated three or four percent.

Despite the disappointing number, retail stocks were little changed on Wednesday, although stocks traded on light volume as many market participants remained on vacation in the wake of the Christmas holiday.

Shares of the SPDR S&P Retail ETF (NYSE: XRT) fell around 0.30 percent on Wednesday. Gap (NYSE: GPS) was down roughly the same, while shares of Target (NYSE: TGT) and Macy's (NYSE: M) were a down bit more, with Macy's tumbling over one percent.

On the other hand, shares of J.C. Penney (NYSE: JCP) continued to rally, trading near $20. On Monday, the shares of the retailer saw a slight boost on a holiday-shortened session after analysts at Oppenheimer made positive comments.

Perhaps no retailer has received as much attention as J.C. Penney in 2012. Year-to-date, shares of the company are down over 40 percent.

The company has posted a string disappointing earnings reports. CEO Ron Johnson's turnaround campaign may ultimately bear fruit, but in the meantime, it has appeared to drive away customers and weaken sales. A strong holiday season could send shares -- which are heavily shorted -- sharply higher.

Retail bulls might use Wednesday's minor weakness to add to their holdings. Yet, NBG retail analyst Brian Sozzi doesn't think so, recommending people continue to avoid the retailers.

Analysts at ISI Group were a bit more bullish. In a note released Wednesday, ISI wrote that it wasn't sure if the MasterCard report was “representative” and noted that consumer confidence was better than anticipated.

Although most stocks are likely to move on any fiscal cliff resolution (or total lack thereof), retailers could be particularly exposed. Tax increases would seem to have obvious negative consequences on the ability of consumers to spend, as greater withholding tax translates into smaller paychecks.

At any rate, the full effect of the holiday season likely won't be seen until retailers begin to report earnings weeks from today.

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