We're Lifting Our Price Target on This Key Holding

The November Retail Sales report showed consumers opened their wallets more during the month than the market expected. The headline figure was up 3.8% year over year, compared to the revised 2.9% print for October. On a sequential basis, headline retail sales rose 0.7% in November, besting the 0.5% market expectation, and at a quicker pace versus the revised 0.5% figure for October. Focusing on the Retail only line, November sales accelerated to 4.1% year over year, far stronger than 2.7% in October and the trailing three-month figure of 2.9%.

While some of this may reflect catch-up spending following Hurricane Milton and consumers taking advantage of early holiday sales, these figures along with the data we saw in yesterday’s December Flash PMI point to an economy on firm footing. We’ll look for more confirmation on that with today’s update for the Atlanta Fed GDPNow model that stood at 3.3% for the current quarter on December 9.

That combination is also another reason to think the Fed will deliver a more measured approach to rate cuts in 2025. But so long as the central bank matches the market’s outlook that now calls for one to two additional rate cuts next year, we could see the market repeat the sigh of relief that followed the November CPI report and move higher. 

Ahead of tomorrow’s policy decision and updated set of projections, we are seeing firms dial back their rate-cut expectations for next year. That includes Goldman Sachs GS, which yesterday removed its call for a January rate cut. Goldman Sachs  said it still expects reductions in March, June, and September 2025, and a slightly higher terminal rate of 3.5%-3.75%.

Factor in the market being in short-term oversold territory, and the odds of a move higher should the Fed deliver an in-line rate cut forecast for next year are that much higher.

Breaking Down November Retail Sales, Raising Amazon's Target

Helping drive those above-consensus November Retail Sales figures was the 9.8% year-over-year jump in Nonstore retail sales. Not exactly a major surprise given the recent findings by Adobe Analytics, but still very nice confirmation for our position in Amazon AMZN. That and findings that shoppers are poised to do more shopping between one and two weeks before Christmas is leading us to lift our AMZN price target to $260 from $240. We’ll also up our AMZN panic point to $180 from $160. We plan on sharing a larger list of updated panic points for the portfolio later today.

Other areas of strength in the November Retail Sales report included Building Materials, up 4.1% year over year in November compared to 3.2% in October, and Motor Vehicles and Parts, up 6.5% in November vs. 3.7% in October. General Merchandise stores held their own at 3.1% year over year and Electronics and Appliance sales rebounded to 1.2% vs. year-ago levels compared to the 2.2% drop in October.

Offsetting those year-over-year gains were declines for Food Services (1.9% vs. October’s 4.2% print), Clothing sales (+2.2% vs. 3.6% in October), grocery sales (1.7% in November, down from 2.2% the prior month), and furniture/home furnishings (0.7% in November vs. 2.6% in October.

Taking a full look at the various line items in the monthly Retail Sales report, we can easily see Costco COST continued to take consumer wallet share during the month. Moreover, the data found in the November report reaffirms our recent price target increase to $1,050 for COST. We’ll plan on revisiting that target again when the company publishes its December sales report on January 8.

The Nasdaq Composite was up 1.2% to 20,173.89 Monday, a record closing high after the index last week crossed and closed above 20,000 for the first time ever. Semiconductor maker Broadcom AVGO, up 11.2%, and Tesla TSLA, up 6.2%, were its top performers as the last full trading week of the year got underway.

At the time of publication, TheStreet Pro Portfolio was long AMZN and COST.