Watch out for 'Returnuary'

Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news and analysis. Good afternoon, today's Thursday to summer 26th, and I'm your host, Kim Kong, our top story so far. Reports continue to indicate that holiday spending hit a record level this year. However, the calendar rolling out past Christmas Day means the end of the peak shopping season and the beginning of the busiest time of the year for returns.

The National Retail Federation forecasts that returns are expected to amount to 17% of all U.S. merchandise sales, totaling 890 billion in return goods. That level would mark an increase from the return rate of about 15% of total sales in 2023. The level of returns in the retail industry has exploded since the pandemic, when consumers became comfortable buying merchandise in more than one size or one color due to the ease and low costs of returning unwanted items.

By some estimates, close to two-thirds of consumers now buy multiple sizes or colors, some of which they send back, a practice known as bracketing. A higher percentage of consumers will also buy an item for a specific event and then return it for a store credit or refund. The phenomenon has become so prominent that experts are taken to calling January as returnuary due to the high volume of returns processed during the month.

With behaviors like bracketing and rising return rates putting strain on traditional systems, retailers need to rethink reverse logistics or to have you return CEO David Sobie. Retailers are adapting to the challenges of return your area by implementing various strategies such as tightening return policies, offering refunds without requiring item returns, and exploring buyback programs to keep products in circulation.

On the economic front, weekly initial jobless claims dipped to 219,000 from 220,000 lower than the 223,000 expected, and bond yields continued to march higher, with a 10-year treasury bumping up against 4.65%.

It's now at levels not seen in seven months. Fed funds futures say the chances are the Fed only cuts once in 2025, with a 20% chance of no move at all. Among active stocks today, Uber issued a statement after the company's planned $950 billion acquisition of delivery hero SE's Food Panda business was blocked by Taiwan's Fair Trade Commission.

Since the announcement of the merger and acquisition plan, we have maintained good interactions with the Fair Association and have made proposals with multiple conditions attached, hoping to address their concerns. Taiwan is still one of the global markets with the highest growth and full of food delivery business opportunities. We will continue to invest in Taiwan and continue to bring innovation.

GameStop is gaining on above average volume. The post-Christmas balance is being attributed to an X-post from Roaring Kitty that was simply a picture of a wrapped present with no explanation or stock symbol attached to it. The X-post has been retweeted more than 8,000 times and has more than 3.9 million likes, although below some of Roaring Kitty's greatest hits from the peak meme era.

And Toyota is rallying after the Nikkei reported that the Japanese automaker is targeting a 20% return on equity rate by around 2030 to maintain global competitiveness. In other news of note, Macao is expecting almost 36 million visitors in 2025 fueled by Beijing's expanded individual visitor scheme. That added eight mainland cities to the program in May 2024.

Notably, casinos are introducing smart tables and new Baccarat side beds to enhance the gaming experience and attract more players. With the decline of the VIP segment, casinos are also strategically shifting their focus to premium mass players, who are becoming the main revenue driver. Casino resorts are also focusing on attractive high-end players by expanding their luxury suite offerings.

MGM, China is renovating former VIP drunken areas into luxury suites and guest villas, while Sands, China is adding 1,500 luxury suites to the Londoner Macau. There will also be increased room capacity in Macau in the new year. Galaxy Entertainment's new 17-story Capella Luxury Hotel is expected to open and will feature 36 sky villas and 57 suites, adding a total of 93 high-end accommodations.

and in the Wall Street research corner, Wells Fargo says, enjoy the equities party, but watch out for the hangover. Strategist Samir Samana says because of the excessive positive positioning in equities since the election, investors are focusing on the possibly brighter future while completely ignoring the current disappointing data. Eventually, we think this disconnect will need to be resolved.

The divergence between the S&P performance and those of the Dow and Russell 2000 is due to a downshift in economic surprises, as the economy's health has a greater bearing on the more cyclical companies found in the Dow and Russell," Samana said. Also, history suggests that markets can suffer from disillusionment post inauguration as two high expectations run into the realities of policymaking and legislating.

We think now would be a good time for disciplined investors to make sure that their portfolio allocations to equities are not above recommended allocations, especially with long-term interest rates offering a solid alternative.

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That's all for today's Wall Street Lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at seekingoffa.com slash WSP. And for a wealth of coverage on stocks and ETFs, go to seekingoffa.com slash subscriptions.