Why Target Stock Is Rising Despite Falling Early in Today's Trading

Key Points

• Target stock opened today's trading with a big sell-off as investors reacted to new jobs data from ADP.

• A weaker jobs market could pave the way for interest rate cuts and support gains for growth stocks, but it suggests challenges for Target.

• While the stock saw a pullback early today, it has bounced back thanks to news that the U.S. has reached a trade deal with Vietnam.

• 10 stocks we like better than Target ›

Target (NYSE: TGT) stock is in the green Wednesday despite seeing a big sell-off early in the day's trading. The company's share price was up 1.4% as of 2:30 p.m. ET. The stock had been down as much as 5.3% earlier in the session.

Target opened today with a substantial sell-off following a jobs report from ADP that showed an unexpected decline for the U.S. private sector labor force. Despite the initial pullback, an announcement that the U.S. has reached a trade deal with Vietnam has pushed the stock into positive territory in the daily session.

Image source: Getty Images.

Why the latest labor data initially prompted a sell-off for Target stock

ADP published its latest payroll data this morning and reported a decline of 33,000 jobs in the private sector in June. Meanwhile, the average economist estimate had actually called for private-sector payrolls to increase 110,000 in the month.

A weaker-than-expected jobs report actually supports expectations that the Federal Reserve will cut interest rates this month, but it's a bearish indicator for Target despite helping to support a bullish case for growth stocks. The substantial miss on the latest jobs data suggests that consumer spending could weaken, and that could create added sales headwinds for Target.

The latest trade news is lifting Target stock

President Donald Trump announced today that the U.S. has reached a trade agreement with Vietnam, and the news has helped lift target stock despite negative indicators connected to ADP's jobs report. As a leading player in the retail space, Target faces big headwinds connected to new tariffs -- but the newly reached deal with Vietnam suggests that the company should be able to mitigate some of the challenges it faces.

While tariffs on China may not fall significantly below current levels in the near future, Vietnam is a manufacturing hub that many consumer goods companies have been pivoting production to. The new trade deal between the U.S. and Vietnam could pave the way for Target and its suppliers to lessen adverse margin impacts.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

Why Target Stock Is Rising Despite Falling Early in Today's Trading was originally published by The Motley Fool