Although department store stalwart Nordstrom (JWN) represents an American business icon, post-pandemic events have largely put a damper on JWN stock. Last year, the consumer economy struggled against the headwinds of skyrocketing inflation and the subsequent mass layoffs. However, this year, Nordstrom shares have been surprisingly resilient. As well, they just courted bullish activity in the derivatives market. Nevertheless, prospective investors should approach with caution.
Now, that’s not to say that JWN stock lacks legitimate reasons for its recent bullish price action. In early March, CBC News reported that Nordstrom will be closing down in Canada, shuttering all 13 stores. In addition, approximately 2,330 people will lose their jobs. Obviously, the announcement hurts these workers, along with Canadian fans of the department store. Still, from a corporate perspective, the enterprise should become leaner and more focused.
Interestingly, late last month, Zacks Equity Research identified unusual dynamics with JWN stock, specifically that its implied volatility – or an indicator that demonstrates how much movement the market expects in the future – surged. After a quick dip, JWN managed to march steadily higher. For example, in the past five sessions, shares moved up more than 2%.
Additionally, JWN stock became one of the top subjects of Barchart’s screener for unusual stock options volume. Here, following the close of the April 13 session, total volume hit 67,042 contracts against an open interest reading of 258,401. Moreover, the delta between the Thursday session volume and the trailing one-month average volume came out to 831.66%.
Drilling into the details, call volume reached 59,382 contracts. In sharp contrast, put volume only printed 7,660 contracts. Mathematically, this pairing yielded a put/call volume ratio of 0.13, on paper significantly favoring the bulls. While recent developments suggest JWN stock may be a buy, investors should first consider the bigger picture.
JWN Stock Still Faces Significant Economic Challenges
Although traders might see upside in JWN stock – especially following its trailing-year loss of 43.36% – this perspective probably centers on a near-term framework. Further out, it’s difficult to be so optimistic about Nordstrom or any other department store-related investment.
Again, while we may have marched away from the worst of the COVID-19 crisis, we must still deal with the pandemic’s economic consequences. For this canvas, the Federal Reserve’s aggressive rate hikes last year helped keep escalating costs under control. Nevertheless, inflation remains stubbornly elevated. As long as this is the case, discretionary retail plays like JWN stock will court doubts.
Further, the rising number of mass layoffs which have carried over from last year to this year continue to cast a cloud over the consumer economy. While people might be spending, at some point, the economy will run into a math problem unless the labor market holistically improves. Otherwise, the cuts that we’re seeing – basically from the science, technology, engineering, math (STEM) jobs – will disproportionately hurt JWN stock.
Here’s the deal: when we talk about the layoffs over the last 16 months, we’re not talking about hamburger-flipping jobs. Don’t get me wrong – there’s nothing wrong with flipping burgers. However, that’s not exactly an economic engine and there are plenty of such employment openings right now.
No, with the latest batch of pink slips, we’re dealing with tech or tech-related enterprises, enterprises that can afford to pay top dollar for top talent. This consumer cohort has the money to spend on frivolities at Nordstrom stores. Unfortunately, as companies lean out, Nordstrom’s addressable market will likewise wane.
If that wasn’t enough of a concern, the surprise production cut by OPEC+ threw monetary policy implications for a loop. Essentially, the Fed can do nothing and let energy prices rise or it can double down, raising interest rates and thereby increasing the probability of a hard landing.
Either way, it’s not great news for JWN stock.
Lacking Holistically Encouraging Signs
While JWN stock has been resilient in 2023 and traders have taken long-sided potshots, few other technical indicators support the bullish narrative. For example, the Barchart Technical Opinion indicator rates JWN as a 64% sell. Further, when it comes to the long-term indicators, they rate as a consensus 100% sell.
Currently, Wall Street analysts diplomatically peg JWN stock as a consensus hold. Surprisingly, three analysts view JWN as a strong buy. However, the rest of the pack – eight holds, one moderate sell and three strong sell – dominate the overall rating.
Frankly, it’s not shocking that JWN stock features few takers because of its 60-month beta of 2.21. A security that matches the ebb and flow of the S&P 500 index would feature a beta of 1. Based on the calculation that goes into this indicator, Nordstrom shares are wildly volatile. Therefore, caution is key.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
