Is Wal-Mart to Blame for the Market Thump?

The country’s biggest retailer reports a tepid fall in store sales. The stock market tumbles. Is there a connection between these two events? Did you think yes? Well you are wrong if you did. The fact is Wal-Mart’s problems are just that; Wal-Mart problems.

In October, when the giant retailer announced a flat rise in same-store sales, competitors begged to differ with better figures. I bet today’s announcement of a decline in same-store sales in November, apparently the first monthly decline for Wal-Mart in 10 years, will not be mirrored by competitors.

This is not a piece on Wal-Mart but today’s retreat on Wall Street has little to do with the firm’s announcement. After all, many people do not shop at Wal-Mart and the giant retailer does not sell everything under the sun.

If Wal-Mart is really not the scapegoat for today’s market tumble, can it be the decline of the dollar? I don’t think so. The greenback tumbled on Friday, and Wall Street’s already taken it on the chin. Actually, a weak dollar is good for US exporters and multinationals - when profits are repatriated from operations overseas.

So the dollar’s collapse should be good news at least for large caps. Oh, by the way, the dollar actually strengthens against the Japanese Yen today. Furthermore, markets across the water in Frankfurt, London and Paris also tumble. So the weak dollar is not the right culprit for today’s market decline.

Now if it’s neither the dollar nor Wal-Mart, what is responsible for rattling investors? Maybe the rise in oil prices played a part but it’s mostly plain old profit-taking. After months of running up there’s a belief that the market needs a correction to prevent stocks from getting overpriced.

So investors take some money off the table. Since the fourth quarter has historically been good for stocks some of that money will find a way back into the market soon.

In folio news, SLV is the only stock that holds its head in the bloodshed today. I’ve touted the values of SLV as a good diversifier of folio risk for a while now. It has a negative correlation with some folio stocks and very little positive correlation with others.

This means SLV moves mostly in opposite direction to other stocks and even the market. PG is another stock that behaves this way. Every portfolio should have stocks like PG and SLV. They’re like a bullet-proof vest: you may not think much of it until it saves your life.