In what seems like a flash, the first quarter of 2017 is behind us.

And the second earnings season of the year kicks off this week — the first of the Trump presidential era.

So far, there’s plenty to get excited about…

Last quarter, 65% of S&P 500 firms beat bottom-line analyst estimates, according to FactSet. They also project the biggest quarterly earnings growth for the S&P since 2011.

But not all companies will be jumping for joy this season.

And as senior analyst Jonathan Rodriguez notes below, an entire sector is bracing itself for a world of pain…

Ahead of the tape,

Louis Basenese
Chief Investment Strategist

Retail Terminator: Judgment Day

As a Wall Street Daily reader, you often hear that stock prices ultimately follow earnings.

The idea is simple: If a company’s earnings are rising, the stock will rise as it becomes more valuable.

The inverse is also true. When earnings slip, the stock is sure to follow.

Well, few sectors have slipped as much as retail over the last decade.

Of course, one look at a 10-year chart of XRT — the SPDR exchange-traded fund that tracks large-cap retailers — might tell you otherwise. In the last 10 years, the retail benchmark has gained 90%, excluding dividends — compared with a 62% rise in the S&P 500 over the same period.

There’s one problem, though…

Much of XRT’s gains were driven by online shopping behemoth Amazon. And while Amazon has soared, brick-and-mortar shops have been dying a slow death.

Since 2007, the once-mighty office supply firm Staples Inc. has lost nearly two-thirds of its market value.

And shares of two other key XRT holdings — Sears Holdings Co. and SuperValu — have dropped a stunning 90%.

Ultimately, the downfall of retail has long investors shaking in their boots. But short sellers are licking their chops.

As I pointed out last month, investors stand to bag fortunes playing the downside on certain stocks. And if you’re looking for the next “big short,” earnings season for retail is the best place to start.