Retail stocks have been crushing the market against all odds — and traders are betting on more gains

  • Retail stocks have been outperforming the broader market over the past month.
  • Even after these market-beating returns, the options market shows that traders are getting more bullish on the sector going forward.


For months, market experts have been sounding the alarm on the retail apocalypse. As Amazon wields its mighty influence over multiple industries, it's been all but assumed that many traditional retailers will lose a huge chunk of value, if they survive at all.

STOCK PRICE FOR GPS

Full price information

But against all odds, retail stocks have been mounting a silent comeback in the stock market over the past month. Foot Locker, Macy's, and Gap are the three biggest gainers in the S&P 500 during the period, surging more than 28%.

Most popular stores in the US:

51 PHOTOS
The most popular stores in America
See Gallery
The most popular stores in America

ALABAMA: Target 

Photo credit: Reuters 

ALASKA: Walmart

Photo credit: Reuters 

ARKANSAS: Target 

Photo credit: Reuters 

ARIZONA: Walmart 

Photo credit: Reuters 

CALIFORNIA: Target  

Photo credit: Getty

COLORADO: Target 

Photo credit: Reuters 

CONNECTICUT: Target 

Photo credit: Reuters 

WASHINGTON, D.C.: Macy's 

Photo credit: Reuters 

DELAWARE: Target 

Photo credit: Reuters 

FLORIDA: UNIQLO 

Photo credit: Reuters 

GEORGIA: Target 

Photo credit: Reuters 

HAWAII: Walmart 

Photo credit: Reuters 

IOWA: Target

Photo credit: Reuters 

IDAHO: Fred Meyer 

Photo credit: Getty

ILLINOIS: UNIQLO 

Photo credit: Getty

INDIANA: Target 

Photo credit: Getty

KANSAS: Target 

Photo credit: Getty

KENTUCKY: Target 

Photo credit: Getty

LOUISIANA: Target

Photo credit: Getty

MASSACHUSETTS: Primark 

Photo credit: Reuters 

MARYLAND: Walmart

Photo credit: Reuters 

MAINE: Target 

Photo credit: Reuters 

MICHIGAN: Walmart 

Photo credit: Reuters 

MINNESOTA: Target 

Photo credit: Getty 

MISSOURI: Target

Photo credit: Shutterstock 

MISSISSIPPI: Target 

Photo credit: Getty

MONTANA: Walmart

Photo credit: Getty 

NORTH CAROLINA: Target 

Photo credit: Reuters 

NORTH DAKOTA: Target 

Photo credit: Reuters 

NEBRASKA: Target 

Photo credit: Reuters 

NEW HAMPSHIRE: Walmart 

Photo credit: Reuters 

NEW JERSEY: Target 

Photo credit: Reuters 

NEW MEXICO: Walmart 

Photo credit: Reuters 

NEVADA: Walmart 

Photo credit: Reuters 

NEW YORK: Bloomingdale's 

Photo credit: Reuters 

OHIO: Walmart

Photo credit: Reuters 

OKLAHOMA: Target 

Photo credit: Reuters 

PENNSYLVANIA: Walmart 

Photo credit: Reuters 

RHODE ISLAND: Target 

Photo credit: Reuters 

SOUTH CAROLINA: Walmart 

Photo credit: Getty 

SOUTH DAKOTA: Walmart 

Photo credit: Getty 

TENNESSEE: Target 

Photo credit: Getty

TEXAS: Target 

Photo credit: Getty 

UTAH: Walmart 

Photo credit: Getty

VIRGINIA: Bloomingdale's

Photo credit: Reuters 

VERMONT: Walmart 

Photo credit: Reuters 

WASHINGTON: Fred Meyer 

Photo credit: Getty 

WISCONSIN: Target 

Photo credit: Getty 

WEST VIRGINIA: Walmart 

Photo credit: Reuters 

WYOMING: Walmart

Photo credit: Reuters 

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

Meanwhile, on a sector basis, three of the top six best-performing industries in the last month are in the retail space, out of 24 groups. They've each climbed more than 5.9% during the stretch, smashing the benchmark S&P 500's gain of just 1.5%.

And, in a development that's perhaps the most telling of all, traders are getting more confident about further increases. Their piqued interest can be seen in a measure of outstanding options on an exchange-traded fund tracking the retail sector. Open interest on the SPDR S&P Retail ETF has risen to more than 530,000 contracts, the most since January 2014, according to data compiled by Bloomberg.

STOCK PRICE FOR M

Full price information

In a sign that those traders are using those additional contracts to get express more confidence in retail, the ratio of bullish options to bearish ones has climbed sharply. Further, a measure of investor positioning known as skew shows that investors have been paying less for downside protection.

STOCK PRICE FOR FL

Full price information

So why the sudden change of heart for investors? For one, it's possible that they've been encouraged by recent turnaround efforts by traditional retailers. Perhaps the most resilient company has been Walmart, which smashed analyst expectations during the third quarter after growing its online business.

It's also within the realm of possibility that traders think retail stocks simply got oversold. After all, Macy's and Foot Locker — two of the success stories mentioned above — were down more than 50% year-to-date before their recent rallies.

Regardless of the true reason, it's clear that retail is enjoying a rare patch of strength. And while the long-term future of the industry is still very much up in the air, it's an encouraging sign that traders are betting on continued resilience.

NOW WATCH: The stock market is flashing warning signs

See Also:

SEE ALSO: The next stock market crash will look a lot different than the financial crisis

Read Full Story

Markets

NASDAQ 6,875.08 35.00 0.51%
S&P 500 2,659.99 8.49 0.32%
DJIA 24,386.03 56.87 0.23%
NIKKEI 225 22,938.73 127.65 0.56%
HANG SENG 28,965.29 325.44 1.14%
DAX 13,123.65 -30.05 -0.23%
USD (per EUR) 1.18 0.00 0.01%
USD (per CHF) 0.99 0.00 -0.07%
JPY (per USD) 113.56 0.02 0.01%
GBP (per USD) 1.33 0.00 -0.35%

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.