Weakened consumer spending is causing a market shift as companies scramble to adjust their strategies ahead of the crucial holiday season.
Leading the signs of a transition is the Federal Reserve's recent 50-basis-point rate cut. Fed Chairman Jerome Powell is signaling the central bank's plans to shift its focus away from inflation and toward employment.
Meanwhile, heightened tensions between Israel and Iran are threatening to expand the scope of the Israel-Hamas war. And at home, a dockworker strike is straining supply chains along the East and Gulf Coasts ahead of the holiday shopping season.
Consumer companies are adjusting to the shift in spending, with moves from Nike, FedEx and Mastercard adding to fears among stock investors. While the market has mostly continued to shake off the gloom, the signs of a more cost-sensitive consumer are growing.
"Do pay attention to what higher prices will do to the consumer, and what they will do to retailers, even if it's short term," Jon Najarian of Market Rebellion told Investor's Business Daily's "Investing with IBD" podcast.
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Consumer Spending: Nike Stock Is An Indicator
Nike stock remains turbulent as that company's management shake-up continues to drive news. Chief Executive Jon Donahoe will be replaced by Elliott Hill on Oct. 14 in an attempt by the athleticwear specialist to drive up sales and fight stiffer competition.
On Tuesday, Nike reported a mixed quarter, with revenue missing estimates and the company announcing it would withdraw full-year guidance, attributing the decision to expected changes from the incoming CEO.
"There are some positives at Nike, but boy they've really had a tough road to hoe here," said Najarian. He contends Nike's management change resulted from the consumer-spending-driven market shift.
Nike stock fell earlier this week in heavy volume and has a poor Composite Rating of 53. Further, the company ranks 10th among the 13 stocks in the Apparel-Shoes & Related Manufacturing group followed by IBD.
Payment Companies Adjust To New Rates In Market Shift
The market shift is also causing payment processors and buy-now-pay-later companies to adjust their strategies to a change in consumer spending. Affirm is seeing its stock waver after a steady downward march that began early this year.
Also, Mastercard stock has yet to commit to a direction after breaking out from a cup pattern in early September, according to MarketSurge.
Both Affirm and Mastercard stock are particularly sensitive to interest rates set by the Fed. More favorable rates can increase the amount of money available to borrow between banks. That ultimately affects their willingness to lend credit to consumers.
Najarian says that while credit-card companies also see a boost, buy-now-pay-later companies tend to benefit during harder times for consumers as an easy way to access credit.
Logistics Grapple With Consumer Spending
Finally, transportation and logistics stocks like FedEx feel the pain from market shifts, Najarian says. He points to FedEx's recent earnings and says customers are becoming more selective and price-sensitive.
"It's not like (businesses and consumers) stopped shipping things, but most of them were looking for the best price," Najarian said.
FedEx stock saw a breakaway gap in June after two consecutive cup patterns but failed to sustain momentum.
FedEx ranks No. 1 in the Transport-Air Freight group of stocks, but weaker consumer spending has led to a weak Composite Rating of 38, according to IBD Research.
Tap here to learn how to avoid getting spooked in a market shift.
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