With the start of the Thanksgiving week, investors are bullish on U.S. stocks, given its history of strong market performance. This is especially true as the holiday-shortened week is usually a bullish feast for stock investors, even with low volumes, as consumer spending is expected to rise.
Consumer spending is likely to reach $125 billion, up 10% year over year, this Thanksgiving weekend despite higher inflation and higher interest rates. This would propel the economy and stocks higher.
To tap the trend, investors could reap solid gains by investing in stocks of the industries likely to benefit the most this week. Some of these are
Chipotle Mexican Grill ( CMG Quick Quote CMG - Free Report) , Dillard's ( DDS Quick Quote DDS - Free Report) , American Airlines Group ( AAL Quick Quote AAL - Free Report) , Canadian National Railway ( CNI Quick Quote CNI - Free Report) and MakeMyTrip Limited ( MMYT Quick Quote MMYT - Free Report) . These stocks have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a Growth Score of B or better. They have also witnessed positive earnings estimate revision for the holiday quarter over the past 30 or 60 days. You can see . the complete list of today’s Zacks #1 Rank stocks here Solid Historical Trends
While elevated inflation, Fed’s aggressive rate hike and recession fears have been playing foul on the stock market, higher consumer spending should provide a boost to the stocks this week. According to Bespoke Investment Group, the Thanksgiving week has returned modest gains for stocks dating back to 1945.
Researchers say that since then, the entire week of Thanksgiving has averaged a 60-basis-point gain for the S&P 500, with the best returns coming on Wednesday before the holiday and Black Friday and the only decline on average on Monday at the start of the week.
Per researchers, the S&P 500 Index has gained 0.54% on average during the week over the past 50 years, with 68% of the returns coming in positive. Bright Spots
According to the National Retail Federation, a record 166.3 million people are planning to shop from Thanksgiving Day through Cyber Monday this year. This represents 8 million more people than last year and is the highest estimate since NRF began tracking this data in 2017.
Americans will spend $125 billion, up 10% from last year. About 89% of consumers expect to shop in the period beginning Thanksgiving Day and ending Cyber Monday, despite concerns of inflation and rising interest rates.
Black Friday continues to be the most popular shopping day, with 69% planning to splurge, followed by 38% on Cyber Monday. Among the 114.9 million Black Friday shoppers, 67% say they expect to head to stores, up from 64% in 2021. Online search (43%) remains the most popular source of gift inspiration, followed by friends and family (35%), and within a retail store (31%). The top five gift categories that consumers plan to give are clothing (55%), followed by gift cards at 45%, toys at 37%, books/music/movies/video games at 33%, and food/candy at 31%. Travel service provider American Automobile Association (AAA) expects 2022 to be the third-busiest Thanksgiving travel season in the United States over the last two decades.
About 54.6 million people will travel 50 miles or more from home this Thanksgiving. This is up 1.5% from last year and represents 98% of the pre-pandemic volumes. Of them, 49 million (up 0.4% from the last year) will go on road trips, 4.5 million (up 8%) will fly, and the remaining 1.4 million (up 23%) will travel by train, bus or cruise.
However, Americans are bracing for a costly Thanksgiving this year, with double-digit percent increases in the price of turkey, potatoes, stuffing, canned pumpkin and other staples. The average cost of serving 10 people for Thanksgiving is expected to be $64.05 (or less than $6.50 per person), up 20% from last year’s average of $53.31, according to the American Farm Bureau Federation's annual Thanksgiving dinner cost survey. Higher prices should benefit restaurant companies. Stocks to Shower Gains Chipotle Mexican, together with its subsidiaries, operates quick-casual and fresh Mexican food restaurant chains. Chipotle restaurants feature free-range, hormone-free pork, natural chicken and other meat products cooked through traditional methods and served in a unique atmosphere. The company has a market cap of $41.6 billion. Chipotle Mexican saw solid earnings estimates revision of 38 cents over the past month for the holiday quarter. The stock carries a Zacks Rank #2 and a Growth Score of A. Dillard's is a large departmental store chain featuring fashion apparel and home furnishings. It also sells its merchandize through the Internet at www.dillards.com. Stores are mainly located in the Southwest, Southeast, and Midwest regions of the United States. Dillard's has witnessed a solid earnings estimate revision of $2.37 for the current quarter in a month. With a market cap of $6.2 billion, DDS has a Zacks Rank #1 and a Growth Score of B. American Airlines, through its subsidiaries, operates as a network air carrier. The company provides scheduled air transportation services for passengers and cargo through its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C., as well as through partner gateways in London, Madrid, Seattle/Tacoma, Sydney, and Tokyo. AAL has a market cap of $9.1 billion. American Airlines saw a solid earnings estimate revision of 41 cents over the past 30 days for the holiday quarter. It has a Zacks Rank #3 and a Growth Score of B. Canadian National is engaged in the rail and related transportation business. It operates as the largest rail network in Canada and is the only transcontinental network in North America. Canadian National saw positive earnings estimates revision of three cents over the past month for the holiday quarter. Canadian National has a market cap of $84.2 billion. It has a Zacks Rank #3 and a Growth Score of B. MakeMyTrip is an online travel service company, which offers travel products and solutions in India and the United States. The company's services and products include air tickets, customized holiday packages, hotel booking, railway tickets, bus tickets, car hire and facilitating access to travel insurance. MakeMyTrip has witnessed a solid earnings estimate revision of 5 cents for the current quarter over the past 30 days. With a market cap of $3 billion, MMYT has a Zacks Rank #2 and a Growth Score of A.