OPEC+ Indecision “Freezes” Oil Prices

Stocks treaded water this morning amid relatively low trading volumes following the Thanksgiving break. The Dow Jones Industrial Average edged up by about 0.1%, or approximately 40 points. The S&P 500 remained largely unchanged, while the Nasdaq Composite lagged slightly, dropping around 0.2%.

The focus is now on retailers as Black Friday marks the beginning of the holiday shopping season. Major players like Target and Walmart have indicated that consumers are spending with caution, prompting retailers to extend holiday promotions. Early data from Adobe Analytics shows that online shoppers spent $63.2 billion from November 1 to 20, a 5% increase from last year. This year, consumers have already spent over $3 billion on 17 of those days, surpassing last year’s figures.

Consumers are currently navigating through challenges such as higher interest rates, the resumption of student loan payments, credit card debt, and dwindling savings. This financial strain is leading to more cautious spending, with heavy promotions and early shopping proving effective.

Significant discounts are being offered across various categories, with electronics, toys, apparel, televisions, appliances, sporting goods, and furniture all seeing notable price reductions. Consequently, online sales for toys have surged by 76% compared to October, while appliances and apparel have seen increases of 30% and 22%, respectively.

The anticipation for the best deals continues, with predictions suggesting that the best time to buy televisions is on Black Friday, toys and apparel on Sunday, and electronics and furniture on Cyber Monday. Adobe forecasts that the Cyber Week, spanning from Thanksgiving to Cyber Monday, will generate $37.2 billion in online spending, accounting for about 17% of the total holiday season sales.

Corporate America is adapting to these changing consumer behaviors. Retailers like Target and Best Buy initiated Black Friday deals as early as October, while Walmart began its promotions on November 8.

“Consumers are very deal-focused and making spend trade-offs right for their budget,” said Best Buy CEO Corie Barry on a recent earnings call.

Despite these efforts, retail chains are setting modest expectations for the holiday season. American Eagle anticipates a high single-digit revenue increase in Q4, while Abercrombie and Fitch expects a low double-digit sales increase next quarter. These outlooks have led to falling retail shares over the last week.

On a positive note, companies investing in mobile shopping are reaping benefits, with nearly half of online orders this month being placed through mobile apps. Mobile spending is projected to hit $113 billion from November to December, marking a 14% increase year over year.

However, not all pandemic-era shopping trends are persisting. Curbside pickup, which accounted for 19.4% of orders last year, has decreased to 17.4% as in-person shopping makes a comeback. Adobe anticipates a shift in this trend as the holidays approach and consumers seek to avoid shipping costs.

In financing trends, the use of buy now, pay later methods has risen by 14.5% compared to last year, accounting for $4.9 billion in online spending this November. So, while retailers will undoubtedly enjoy a bump in Black Friday sales, this might just be a case of consumer spending getting pulled forward. Overall sales could still easily skew to the weaker side just as most retailers have warned in recent earnings reports.

Meanwhile, chaos from OPEC+ is influencing oil. The group’s decision to hold its next meeting online, delayed due to a dispute between Saudi Arabia and African members over quotas, is keeping a lid on oil prices. Brent crude futures remained flat above $81 per barrel, while West Texas Intermediate crude futures dropped around 1% to just above $76 a barrel after the Thanksgiving trading break. With recession fears rising, OPEC+ may have to do significant cutting if it’s going to keep oil prices elevated.

And while sliding oil prices would certainly be a welcome sight at the pump, they would also switch equity sentiment from “dovish optimism” to “slowdown pessimism,” especially at the top of a dizzying November rally.


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