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Black Friday and Cyber Monday

When it comes to spending, Black Friday and Cyber Monday kick off the start of the retail spending extravaganza. Many retailers, including e-commerce, depend heavily on the sales generated. To many, the outcome of this brief period can either make or break retailers.


What is Black Friday?


According to History.com, in the early 1960s, the Philadelphia police complained about the motorists and pedestrians clogging the streets as they moved toward the Army-Navy football game, and looking for deals to post-Thanksgiving, coined the day as Black Friday. The term signals the start of the Christmas shopping season. Black also refers to retail stores moving from the red or red ink denoting losses to the black or black ink for profits when accounting occurred by hand.


Why is Black Friday so popular?


Millions of shoppers tend to do serious shopping on Black Friday. It is one of the pivotal shopping days of the year, falling between November 23 and November 29. Although it is not an official federal holiday, many employees take off work and wait in long lines at ridiculous hours to enter retail stores to get the deals.


Covid-19 pandemic and the shift toward online shopping


The Covid-19 pandemic that began in 2020 dramatically changed shopping. Because of the lockdowns, consumers turned to shopping online. The preference for online shopping exploded and became the dominant form of shopping for the season. Covid-19 all but ended in-store shopping during Thanksgiving during the shutdown as most retailers closed for the day.


What is Cyber Monday?


The term describes the popularity of online sales that occur on the Monday after Thanksgiving. It is the online counterpart to Black Friday, which tends to involve brick-and-mortar retail stores. Recently, Cyber Monday has become as popular as Black Friday due to the popularity of smartphones and the internet. Cyber Monday is famous for its low prices on tech-related products such as laptops, gaming consoles, software games, TV, electronics, cell phones, cameras, etc.


Black Friday and Cyber Monday shopping and spending statistics


It was a big weekend for retailers last year. Black Friday and Cyber Monday exchanged leadership roles over the years. In 2021, Black Friday drew almost 90 million shoppers. Cyber Monday brought in 77 million shoppers.


However, Cyber Monday beat out Friday in total online spending as shoppers spent $10.7 billion, which is about $100 million shy of the record of $10.8 billion in 2020. Shoppers also spent $8.9 billion on Black Friday last year, slightly less than $9 billion in 2020.

Despite inflation concerns this year, a Deloitte survey of 1,200 consumers suggests that shoppers will spend an average of $500 during Black Friday and Cyber Monday this year. If this occurs, it will be an increase in spending of around 12% from 2021.


Consumer Spending, Confidence, and the U.S. Economy


While Black Friday and Cyber Monday are two separate shopping events, the lines separating the two are difficult to tell due to the popularity of online shopping and the shift toward technology-related products. As the digital landscape changed, e-commerce retailers adjusted to consumer trends and needs. More retailers and e-commerce are rolling out Black Friday deals as early as late October and pushing up their Cyber Monday sales earlier each year.


Whether consumers shop on Black Friday or Cyber Monday can impact the sales and revenues of brick-and-mortar retailers and e-commerce companies. Since consumer spending is 70% of the U.S. GDP, the sales and revenues reported during the Black Friday and Cyber Monday sales can give early clues to the health and sentiments of consumers heading into Christmas. Also, this year, inflation can be a driver of consumer spending and retail sales growth.


S&P Retail Index (RLX) and SPDR S&P Retail ETF (XRT)


We recommend investors and traders closely monitor the S&P Retail Index (RLX – 2,43.77) and the SPDR S&P Retail ETF (XRT – 66.64) in the weeks ahead as they are the largest pure-play on the retail market comprising some of the largest retailers. As of 11/23/22, XRT is one of the largest retail sector ETFs, with a market cap of $339.84 million.


XRT has plummeted 46.66 points or 45.75% from the Nov 2021 all-time high (101.98) to the September 2022 low (55.32). Many cyclical stocks, including retail companies, continue to struggle and will need to do well into the crucial Black Friday/Cyber Monday to Christmas period to break even for the year.


The S&P Retail Index (RLX – 2,943.77) and the SPDR S&P Retail ETF (XRT – 66.64) may be developing technical bases. However, they will need to break out to confirm the start of turnaround scenarios.


RLX must clear above the 50-day ma (2,990.32) and 11/15/22 high (3,049.02) to signal the start of recovery toward pivotal resistance at 3,182-3,292 (Jun//Oct 2022 highs, 200-day ma, and 61.8% retracement from Aug-Nov 2022 decline) and 3,414 (Nov 2021 downtrend).


XRT also nears crucial near-term resistance at 66.5-67.5 (Jun, Sept, and Nov 2022 highs and the 200-day ma). A convincing breakout negates a head and shoulders top and signals a recovery toward pivotal resistance at 73-75.37 (38.2% retracement from Nov 2021-Sept 2022 rally). Above this opens the door for an intermediate-term recovery to 78.5-81 (Mar/Apr 2022 highs and the 50% retracement) and 84-86.77 (61.8% retracement and the Dec 2021 breakdown).


Does a healthy consumer, denoted by robust consumer spending, translate into a modest or shallow recession next year and the resumption of the structural bull?


Or will a weak consumer trigger a deep and prolonged recession next year and the start of a structural bear/trading range?


Happy Thanksgiving and Happy Shopping!


Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

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