The Street Reacts To Holiday Retail Sales

The 2018 holiday shopping season is tracking to be the strongest in six years, as total retail spending from the start of November through Dec. 24 rose 5.1 percent from a year ago to more than $850 billion, CNN reported, according to Mastercard SpendingPulse. 

Four Experts React

Four experts offered their reaction to CNBC, including Mastercard Inc MA senior adviser Steve Sadove, who said consumers are doing "quite well."

Consumer strength is being seen across all categories at both the lower end and higher end price ranges.

Former Toys R Us CEO Jerry Storch told CNBC the consumer is "on fire" with "a lot of money in their wallet."

Not even "one bad piece of news" is coming from consumers, as brick-and-mortar stores are crowded and the online sector is "absolutely on fire," in Storch's view. 

Wolfe Research analyst Scott Mushkin told CNBC that, despite a strong consumer environment, retailers face challenges in profitability in an environment where online giant Amazon.com, Inc. AMZN is playing a "different game than everyone else."

Related Link: Amazon Sets Holiday Shopping Records

J. Rogers Kniffen Worldwide CEO Jan Kniffen told CNBC he is concerned with the bottom half of 2019.

The first half of 2019 will benefit retailers when consumers receive a tax refund "unlike they have ever seen before," Kniffen said. But the sector needs to "stand on its own" in the third and fourth quarter of next year, she said. 

Feinseth: Buy Costco, Amazon, Mastercard

Investors looking to pick individual stocks may want to consider Costco Wholesale Corporation COST, Amazon and Mastercard, Tigress Financial Partners' Ivan Feinseth said in his daily newsletter.

Costco will likely show record results in its late March earnings report, Feinseth said. The company likely gained market share in a competitive environment given its unique value proposition, excellent merchandise and pricing initiatives, he said.

The warehouse club is backed by an extremely loyal customer base who "pay to shop there," which is a theme investors should take advantage of after recent weakness in the stock, Feinseth said. 

Amazon showed record holiday season numbers, including selling millions of its hardware devices and shipping millions of unique items to consumers, the analyst said. Tens of millions of customers worldwide signed up for Amazon Prime memberships, which will help contribute to what could prove to be a record quarter, he said. Similar to Costco, investors should take advantage of recent weakness in Amazon's stock, Feinseth said. 

Mastercard is likely to continue benefiting from year-over-year increases in gross dollar volume, Feinseth said, adding that the company continues to win new deals with banks and merchants due to its strong security profile and greater payment functionality. Investors should take advantage of the recent pullback in the stock, as it's likely to move above its all-time high of $225, according to Tigress. 

Munster: What Recession?

Amazon's "upbeat tone" in its post-holiday press release calls contradicts recession concerns and the impact on consumer spending, Loup Ventures' Gene Munster and Will Thompson said in a blog post. Amazon likely now boasts 110 million Prime subscribers after adding "tens of millions" more during the holiday, the venture capitalists said. Encouragingly for Amazon investors, Prime membership trends are a leading indicator of growth in Amazon's share of consumer spending, according to Loup. 

Time To Buy The Retail ETF?

Instead of buying individual retail plays, should investors buy the retail exchange traded fund, the SPDR S&P Retail XRT? Matt Maley, an equity strategist at Miller Tabak, told CNBC the ETF's chart points to continued momentum for weeks to come.

The ETF traded earlier this week near $38 per share, which is a "very key support level" corresponding to the 2014, 2016 and 2017 lows, Maley said during a CNBC "Trading Nation" segment. The ETF went on to "strongly" bounce off the support level "on the first try," he said. 

The ETF is also trading at the most oversold level since 2008 based on its relative strength index, which offers some support that a rebound could "last for at least several weeks," Maley said.