An employee uses a forklift truck to move boxes around an Amazon.com Inc. fulfilment center in Koblenz, Germany. (Photographer: Alex Kraus/Bloomberg)

Blockbuster Cyber Monday Is Overshadowed by Economic Outlook

(Bloomberg) -- Shoppers will spend an estimated $7.8 billion on Cyber Monday -- a record -- boosting a strong holiday shopping season. And Wall Street seems to be mostly shrugging it off.

Even a blockbuster holiday won’t divert the market’s attention from rising interest rates next year and the escalating trade war between the U.S. and China that’s expected to slow global economic growth. U.S. President Donald Trump in September imposed 10 percent tariffs on approximately $200 billion worth of Chinese imports and plans to raise the levy to 25 percent in January, which will drive prices higher.

Fears about a consumer spending slowdown in 2019 outweigh any positive signs of a strong holiday, said Tom Forte, analyst at DA Davidson & Co.

“Many of the tariffs will likely be borne by consumers in the second half of 2019 in the form of higher prices on products,” he said. “Higher interest rates may dampen spending on big-ticket items.”

Companies like Amazon.com Inc., Walmart Inc. and Target Corp. that are fighting to win holiday spending online may not see a substantial payoff in terms of their market value. And some technical fumbles on Black Friday showed that traditional stores are still struggling to accommodate the hoards of internet shoppers. Even with substantial investments in technology, some retail giants including Walmart, Lowe’s Cos. and Kohl’s Corp. confronted glitches and malfunctioning websites on Friday, a sign they aren’t keeping pace with the load of consumers switching to e-commerce.

Purchases on Black Friday, traditionally the best day for sales on electronics, totaled $6.22 billion, up 23.6 percent from a year ago, Adobe data show. Spending on Cyber Monday, usually the best day for toy sales, is expected to increase 17.6 percent.

Total holiday retail spending -- in stores and online -- in November and December will grow by more than 5 percent for the second consecutive year, a first since before the Great Recession about a decade ago, said Craig Johnson, president of Customer Growth Partners. Investors may be worried about whether that pace can be sustained, even though it’s grounded in low unemployment and wage growth rather than the heavy use of credit that led to the financial crisis, he said.

“The strong consumer and retail spending we are seeing now is coming off of this healthy foundation, which is much more sustainable than the credit bubble we saw 12 years ago,” Johnson said.

The weekend sales bump doesn’t appear to be enough to help retailers recover from the selloff in their shares last week. Target led the rout, with shares tumbling 15 percent, followed by a 12 percent loss at Kohl’s and 11 percent at TJX Cos., the owner of Marshalls and TJ Maxx. Investors ignored robust quarterly sales growth, focusing instead on squeezed profit margins as companies spend to raise wages and increase online sales, outdo each other on free shipping and face new tariffs in the Trump administration’s trade war with China.

In early trading Monday, Walmart, Target and Kohl’s were all up about 1 percent while Amazon gained 2 percent.

Cyber Monday has its roots in people returning to work from a long Thanksgiving weekend and using the fast internet connections of their office computers to search for the best deals. Such connections are prevalent now in homes and on smartphones, which should make the day less important. But shoppers are still conditioned to hunt for online deals, and retailers try to meet that expectation.

“Even though you see all these pre-Black Friday sales, people concentrate their spending on Cyber Monday," said Taylor Schreiner, director of Adobe Digital Insights.

©2018 Bloomberg L.P.