U.S. equities continue to drift aimlessly just below the Dow Jones Industrial Average‘s 50-day moving average, with two-month support confirmed repeatedly near the 18,000 level.
Yet, below the surface, as market breadth narrows, a growing number of stocks are rolling over to the downside. Included on the list are several consumer-focused names, many of which have reported disappointing earnings or guidance this week.
The context for all this is growing evidence that the American consumer is cooling their heels. A combination of energy price inflation (higher gas prices), higher healthcare expenses and lingering uncertainty about the health of the job market are conspiring to pinch confidence and snap wallets shut.
As a result, the selling pressure against consumer stocks is likely to continue. Keep an eye on these five stocks for further downside pressure.
Consumer Stocks to Sell: Groupon (GRPN)
Groupon Inc (NASDAQ:GRPN) is suffering a 20%-plus decline on Thursday, taking the stock back to its 200-day moving average for the first time since July, collapsing unceremoniously out of a three-month consolidation range above $5.
This after the company reported better-than-expected earnings and revenues for the third quarter and raised its forward guidance. North American revenue was up 4%.
Investors seem to be getting cold feet about the company’s turnaround plan, including the acquisition of LivingSocial, a change to the equity structure, and narrowing its geographic footprint. The company will next report results on Jan. 25 after the bell.
Consumer Stocks to Sell: GNC (GNC)
Fitness nutrition retailer GNC Holdings (NYSE:GNC) is suffering a 24% decline on Thursday, taking shares below the $16 threshold for the first time since going public in 2011. That fully reverses the company’s much heralded near-300% post-IPO surge and continues the downtrend that started in August 2015.
The company reported weaker-than-expected earnings and revenues Thursday morning, with earnings of 59 cents per share missing estimates by 12 cents while sales dropped 8.1% from last year as people are simply buying less protein powder.
Personally, I find Muscle Milk cheaper at Amazon.com, Inc. (NASDAQ:AMZN).
Consumer Stocks to Sell: Under Armour (UA)
Under Armour Inc (NYSE:UA), which was supposed to be the second coming of Nike Inc (NYSE:NKE), has plunged below its 200-week moving average for the first time since 2010 (yep, six years ago), dropping more than 18% this week after management warned of slowing growth.
Despite reporting a quarterly earnings and revenue beat, the market focused on this tepid guidance and the avalanche of analyst downgrades that followed.
The consensus is that the company will need to buckle down and invest in new talent and infrastructure to keep its competitive edge, something that will weigh on profit margins going forward. In other words: The onetime fast-growing upstart has entered middle age.
Consumer Stocks to Sell: Whirlpool (WHR)
Whirlpool Corporation (NYSE:WHR) shares have dropped to February levels, down nearly 25% from the highs set this summer after reporting a top- and bottom-line miss and lowering forward guidance earlier this week. Earnings of $3.66 per share was 19 cents below estimates on a 0.5% drop in revenues year-over-year.
Management noted they were operating in a “challenging external environment,” but believes the softness in U.S. demand is temporary. Investors, apparently, believe otherwise.
The company will next report results on Jan. 26 before the bell. Analysts are looking for earnings of $4.33 per share on revenues of $5.6 billion.
Consumer Stocks to Sell: Macy’s (M)
Macy’s Inc (NYSE:M) shares look ready to drop out of a three-month consolidation range, with another test of critical support near $35 likely, putting the five-month rebound out of the May lows at risk.
Investors are apparently expressing caution about retailers heading into the holiday shopping season. The company was also recently downgraded by analysts at Credit Suisse on doubts about the execution of a new operations and merchandising strategy outlined in August.
The company will next report results on Nov. 9 before the bell. Analysts are looking for earnings of 41 cents per share on revenues of $5.7 billion.