THE TICKER

Retailers are bracing for a dark day this Black Friday, as shoppers continue drifting online for purchases, or worse, sitting on their wallets amid fears the economy is slowing. 

Nerves among national names such as Macy’s and J.C. Penney in part reflect longstanding trends pushing potential customers out of brick-and-mortar stores. "For the first time, the majority of U.S. consumers — 54 percent — say they will do most of their holiday shopping online, according to data from PricewaterhouseCoopers, a professional services firm," my colleague Abha Bhattarai reports.

And only 36 percent of shoppers plan to shop on Friday, down from 51 percent in 2016, a PwC report finds. “Retailers have been touting bargains for weeks. With more shopping moving online, it has only become easier to compare prices, and so the lure of doorbuster deals is losing its grip on shoppers,” CNBC’s Lauren Thomas writes. “That only means more bad news for a group of retailers that has long been dependent on the shopping holiday to push them ‘into the black,’ or toward profitability: America’s department stores.” 

But consumer confidence has also taken a hit in recent months, a potentially troubling indicator for an economy that has relied on that spending as other categories of economic activity have stumbled. The Conference Board just reported that its measure of consumer confidence fell in November for the fourth month in a row. Lynne Franco, the private research group’s senior director of economic indicators, chalked up the slump to fears of a softening labor market. “Growth in early 2020 is likely to remain at around 2%,” she told the Wall Street Journal’s David Harrison. “Overall, confidence levels are still high and should support solid spending during this holiday season.”

Some other economists agree the reading offers little reason for gloom. “Despite the moderate pullback over the past several months, the consumer confidence reading remains high,” the team at Oxford Economics writes in a note. “A still-strong labor market and near-record highs in equity prices will continue to support consumers’ attitudes and should make for a joyful holiday shopping season.”

But there are other warning signs about consumer activity. Ian Shepherdson of Pantheon Macroeconomics points to delinquency rates on auto loans that are sharply rising. “Anything other than a clear rebound in auto buying intentions in November would be a worrying sign, especially given that sales in October were soft,” he writes. “November's results depend on the Black Friday weekend, but we are a bit trepidatious at this point.”

The latest earnings reports from other national retailers offer a muddled picture:

  • Best Buy shares surged Tuesday, touching a one-year high, after it beat analysts’ expectations and raised earnings guidance. “In the near term, we are excited about our holiday plans,” CEO Corie Barry said
  • Dick’s Sporting Goods also topped analysts’ estimates, sending its shares soaring, as CEO Ed Stack said the company is “very enthusiastic about our business” heading into the holiday season. 
  • But Dollar Tree badly missed expectations, sending its stock down 15 percent on the day. CEO Gary Philbin blamed tariffs on Chinese imports for the skid. “The biggest unknown as we sit here today for us and many other retailers is tariffs and where does that land at the end of the day,” he said. 

To the extent a consumer malaise is taking hold, a more general dread of the holiday season this year may help explain it, as shown by this Experian chart, via the WSJ's Daily Shot

PROGRAMMING NOTE: The Finance 202 is going dark for the holiday and will be back in your inbox on Monday. We're wishing you and yours a very happy Thanksgiving in the meantime.  

MARKET MOVERS

Stocks hit new highs. Yahoo Finance's Emily McCormick: "Each of the three major U.S. stock indices hit fresh record intraday and closing highs Tuesday after China signaled trade negotiators were pacing toward a deal, and a batch of retail earnings came in mostly stronger than expected. The Dow jumped more than 50 points as shares of component companies Disney and Microsoft each also rose to record levels. Separately, the small-cap Russell 2000 also rose to a fresh all-time high on Tuesday... A steady drumbeat of messaging from Federal Reserve officials that interest rates would likely remain at their current, relatively low levels has also buoyed stocks."

President Trump highlighted the gains at a Florida rally, taking credit for the "sock rocket": 

Poll: Global rally has more room to run. Reuters's Hari Kishan and Shrutee Sarkar: "The global stock market rally has further to run in 2020, according to analysts, brokers and strategists polled by Reuters, but much depends on U.S. and Chinese officials making real progress in stopping a disruptive trade war. A slim majority of respondents - 53 of 102 - said risks to their outlook were skewed more to the upside in the Nov. 11-26 poll. Just three months ago, a clear majority - 69 of 97 - said risks were more to the downside.

"The turnaround in expectations coincides with a new buoyancy in most equity markets. Fears that the global economy might slip into recession, which the government bond market has been suggesting on and off in 2019 is an imminent risk in the United States, appear to have been alleviated in recent weeks."

Central banks: Not so fast. Bloomberg News's Craig Stirling and John Ainger: "Global central banks are approaching the end of the year with a collective shudder at the risky behavior that their low interest-rate policies are encouraging. Policy makers from European Central Bank and the Federal Reserve are among those raising cautionary flags at potentially unsafe investing stoked by their efforts to flood economies with ultra-cheap money... The warnings are couched in measured language that doesn’t signal panic, but the combined message is one of growing anxiety, laced with the discomfort that central bankers can’t easily tighten policy either."

Home-price growth accelerated in September, marking two-straight months of price increases after a long period of decelerating gains.
WSJ
Short selling, a key plank of their strategy, is scarcely worth the bother if a new paper is correct.
Bloomberg Opinion

TRUMP TRACKER

TRADE FLY-AROUND: 

— Key USMCA negotiators set to meet: “The three trade ministers from the United States, Canada and Mexico are set to meet in Washington on Wednesday to discuss the deal to replace NAFTA, seven people familiar with the plans told Politico,” Megan Cassella, Adam Behsudi and Sabrina Rodríguez report.

“The meeting involving U.S. Trade Representative Robert Lighthizer, Deputy Canadian Prime Minister Chrystia Freeland and Mexican Undersecretary for North America Jesús Seade comes as the Trump administration is nearing a compromise with House Democrats to make changes to the USMCA. Lighthizer has been negotiating with a group of nine House Democrats to address four main concerns involving the pact’s labor, environmental, enforcement and drug pricing provisions.”

— China remains optimistic about talks: “China offered its most positive message in recent weeks that trade talks with the U.S. were going smoothly after a phone call Tuesday between the countries’ top negotiators, raising the prospects for a limited deal sought by both nations,” the Wall Street Journal’s Chao Deng and Bob Davis report.

“China’s Commerce Ministry said the two sides had ‘reached a consensus on properly resolving related issues.’ The message, though short and formulaic, is notable because it followed a call between China’s chief trade negotiator, Liu He, and his U.S. counterparts, Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, and suggested behind-the-scenes conversations have instilled confidence in Beijing that the two sides could overcome their differences.”

Trump says a deal is close: “Trump said Washington was in the ‘final throes’ of work on a deal that would defuse a 16-month trade war with Beijing, but also underscored Washington’s support for protesters in Hong Kong, a potential huge sore point with China,” Reuters’s Andrea Shalal and Kevin Yao report.

“‘We’re in the final throes of a very important deal, I guess you could say one of the most important deals in trade ever. It’s going very well but at the same time we want to see it go well in Hong Kong,’ Trump told reporters at the White House. Trump’s upbeat comments about the trade talks lifted markets, with Wall Street’s three major indexes hitting all-time highs on Tuesday.”

IMPEACHMENT MINUTE:  A speed read on the latest from the congressional impeachment inquiry.

"Trump Knew of Whistle-Blower Complaint When He Released Aid to Ukraine." By the NYT's Michael Schmidt, Julian Barnes and Maggie Haberman. 

"House Judiciary schedules first impeachment hearing as Trump claims he is protecting the presidency." By The Post's Felicia Sonmez, John Wagner and Colby Itkowitz 

"Two OMB officials resigned in part over concerns about Ukraine aid hold, official testifies." By The Post's Erica Werner and Felicia Sonmez 

"3 takeaways from Mark Sandy’s and Philip Reeker’s testimony on Ukraine." By The Post's Amber Phillips 

POCKET CHANGE

— Federal prosecutors launch criminal probe into opioid makers: “Federal prosecutors have opened a criminal investigation into whether pharmaceutical companies intentionally allowed opioid painkillers to flood communities, employing laws normally used to go after drug dealers, according to people familiar with the matter,” the WSJ’s Corinne Ramey reports.

“The investigation, if it results in criminal charges, could become the largest prosecution yet of drug companies alleged to have contributed to the opioid epidemic, escalating the legal troubles of businesses that already face complex, multibillion-dollar civil litigation in courts across the country. Prosecutors are examining whether the companies violated the federal Controlled Substances Act, a statute that federal prosecutors have begun using against opioid makers and distributors this year.”

  • The companies involved: At least six companies have said in regulatory filings that they received grand-jury subpoenas from the U.S. attorney’s office in the Eastern District of New York: drugmakers Teva Pharmaceutical Industries Ltd., Mallinckrodt PLC, Johnson & Johnson and Amneal Pharmaceuticals Inc. and distributors AmerisourceBergen Corp. and McKesson Corp. People familiar with the matter said the subpoenas were in connection with the Brooklyn federal probe.”
  • The difference between potential civil and criminal charges: “Executives and companies can face civil charges under the Controlled Substances Act for not reporting signs, like suspicious orders, that could indicate drugs are being used for nonmedical purposes. Criminal charges require prosecutors to prove an effort to willfully and intentionally avoid such requirements, legal experts said.”

— Tech companies lend China helping hand in surveillance: “Critical pieces of China’s cutting-edge surveillance state share a connection. They came from America,” the WSJ’s Liza Lin and Josh Chin report.

“U.S. companies, including Seagate Technology PLC, Western Digital Corp., Intel Corp. and Hewlett-Packard Enterprise Co., have nurtured, courted and profited from China’s surveillance industry. Several have been involved since the industry’s infancy … For their part, the companies say that their products can be used in any number of ways, and that convoluted supply chains limit their understanding and control over how their goods are put to use.”

Valley still ventures, but there are increasing questions about gains: “The startup industry remains awash in cash, and with interest rates staying historically low, any further steep decline in the private markets is unlikely, investors say,” the WSJ’s Heather Somerville reports. “Still, the magnitude of the value destruction has cast a level of uncertainty over the venture-capital industry not seen in years. It has also prompted some soul-searching and calls by investors for stricter corporate governance.”

  • What a quote: “We’ve been in the middle of a rollicking party that’s gone on for five years and someone has snapped on the light switch,’’ said Chris Douvos, whose firm, Ahoy Capital, invests in venture-capital firms and startups. “We are all adjusting our eyes and no one has any idea how the rest of the night is going to go. That’s how Silicon Valley feels right now.”

— SoulCycle CEO resigns: “Melanie Whelan is resigning from her position as chief executive officer of SoulCycle, effective Tuesday, the company told CNBC Make It. Whelan is also vacating her position as the director on the company’s board,” CNBC’s Cory Stieg reports.

“Both sides felt it was time for a leadership transition, according to a person briefed on the decision who asked not to be named because those discussions were private. A spokesperson for SoulCycle declined to comment on the impetus for the change.”

Business
The ousted CEO — who says he’s had 40 pizzas in 30 days — also contends food quality has diminished since his departure.
Taylor Telford

MONEY ON THE HILL

— Hedge fund throws in its two cents in hopes to profit off Warren fears: “Scott Bessent, the Soros Fund Management alum who runs a $4.5 billion macro hedge fund named Key Square Capital Management, is shorting the dollar in a bid to monetize the market reaction he anticipates,” Bloomberg News’s Katherine Greifeld and Katherine Burton report of the first tangible sign investors are changing behavior based on the senator’s rise.

“‘Intelligent people can argue whether Senator Warren’s numerous programs will be good or bad for American society, but they are unequivocally negative for U.S. asset prices,’ Bessent wrote in a Nov. 14 letter to investors. It’s a risky proposition, as the 2016 election showed. Back then, many predicted a Donald Trump victory would drive down markets, only to watch them surge in the immediate aftermath of his victory. Bessent says, though, that there are many other factors that support his bet now, and that all it might take is Warren’s further rise in polls to spark a sell-off.”

— The elephant(s) in Bloomberg’s past: “Michael Bloomberg’s debut 2020 campaign ad touts that he ‘took charge’ of New York in the wake of 9/11. What Bloomberg doesn’t mention: He leaned heavily on an endorsement from Rudy Giuliani, the then-New York mayor who is now [Trump’s] personal attorney, to win that post. Bloomberg trumpeted his support in TV advertising and direct mail, chastising his Democratic opponent for being ‘no friend of Rudy Giuliani,’ ” Politico’s Holly Otterbein reports.

“Giuliani is just one of many skeletons in Bloomberg’s partisan closet. As he pursues the Democratic presidential nomination, he’ll have to explain the millions he’s spent putting Republicans into office, including contributions backing more than a dozen current and former members of Congress. The billionaire businessman, who has switched parties several times throughout his political career, endorsed George W. Bush’s 2004 reelection campaign, contributed to John McCain and even held a fundraiser for a House GOP member as recently as last year.”

DAYBOOK

Today:

  • Deere and Daktronics are among the notable companies reporting their earnings, per Kiplinger.

Thursday:

  • The market is closed for the holiday. Happy Thanksgiving!

Friday:

  • The market closes early at 1 p.m. 

THE FUNNIES

From The Post's Tom Toles:

BULL SESSION