Closing Comment — Tuesday, August 16, 2022
DJIA: 34,152.01, up 239.57
S&P 500: 4,305.20, up 8.06
Nasdaq: 13,102.55, down 25.50
Stocks mixed; earnings in focus
U.S. equities closed mixed after being whipsawed in volatile trading Tuesday as investors digested earnings from U.S. retailers and downbeat economic data. The Dow rose 239 points, trimming an earlier advance of as much as 368 points. The S&P 500 gained 0.2% while the Nasdaq Composite dipped 0.2% amid weakness in tech shares. Walmart Inc. climbed 5.1% in its best session since 2020 as its profit, revenue, and comparable store sales all exceeded analyst estimates. Additionally, the big-box retailer slightly increased its full-year guidance after cutting its outlook just three weeks ago due to inflation inciting a shift in consumer behavior. Meanwhile, home improvement company Home Depot Inc. advanced 4.1% after posting better-than-expected results and maintaining its full-year guidance despite a housing market slowdown.
Another round of disappointing data dampened investor sentiment. Housing starts in July fell a worse-than-expected 9.6% from June to mark its worst reading since February 2021. Building permits declined 1.3% in the same period, its slowest pace since September 2021. Separately, industrial production increased a stronger-than-forecasted 0.6% in July, rising for the first time in three months.
Treasuries weakened with the yield on the 10-year note up one basis point (0.01%) to 2.81%. West Texas Intermediate crude slipped 3.3% to $86.45/barrel, its lowest point since mid-February. Downbeat economic data and uncertainty surrounding the revival of the 2015 Iran nuclear deal weighed on oil prices. Tomorrow, an update on retail sales for the month of July could provide insight into several macroeconomic trends. Also, investors will assess the Federal Open Market Committee’s (FOMC) meeting minutes from July for clues surrounding the future path of rate hikes.
Midday Comment — Tuesday, August 16, 2022
DJIA: 34,160.05, up 247.61
S&P 500: 4,310.00, up 12.86
Nasdaq: 13,114.18, down 13.87
Stocks mixed, retailers in focus
U.S. stocks are mixed near mid-session Tuesday as Wall Street assesses corporate earnings reports from major U.S. retailers, along with downbeat economic updates. The S&P 500 is rising 0.3%, while the Dow is adding 247 points. The Nasdaq Composite is dipping 0.1%.
In earnings, Walmart Inc. is climbing 5.4% as its profit, revenue, and comparable store sales all exceeded analyst estimates. Additionally, the big-box retailer slightly increased its full-year guidance after cutting its outlook just three weeks ago due to inflation inciting a shift in consumer behavior. Meanwhile, home improvement company Home Depot Inc. is advancing 4.4% after posting better-than-expected results and maintaining its full-year guidance despite a housing market slowdown. Breadth is positive on issues by 10:7 on the NYSE and negative by 4:3 on the Nasdaq. Composite NYSE volume is greater than 1.9 billion shares.
On the data front, housing starts fell a worse-than-anticipated 9.6% in July, the worst reading in 17 months. Building permits declined 1.3% during the same period, the slowest pace since September 2021. Separately, industrial production rose a stronger-than-expected 0.6% in July, rising for the first time in three months.
Treasuries are weakening, with the yield on the 10-year note up three basis points (0.03%) to 2.83%. In commodities, West Texas Intermediate crude is sliding 2.6% to $87.08/barrel, the lowest level in six months, as recessionary concerns pressure the demand outlook. Worries about additional global supply and a stronger U.S. dollar are also weighing on oil prices.
Opening Comment — Tuesday, August 16, 2022
DJIA: 33,912.44, up 151.39
S&P 500: 4,297.14, up 16.99
Nasdaq: 13,128.05, up 80.86
Stocks lower; earnings in focus
U.S. futures are pointing to a slightly lower open Tuesday as Wall Street digests earnings from major U.S. retailers. The Dow is off less than 0.1%, while the S&P 500 is dipping 0.1% in pre-market action. The Nasdaq 100 is trading 0.1% below fair value on the GLOBEX. Walmart Inc. (WMT) is adding 4.2% after its profit, revenue, and comparable store sales all exceeded analyst estimates. Additionally, the big-box retailer slightly increased its full-year guidance after cutting its outlook just three weeks ago due to inflation inciting a shift in consumer behavior. Sales grew 8% last quarter, while profit tightened due to consumers purchasing less high-margin discretionary goods and instead spending more on necessities. This follows yesterday’s session, during which the S&P 500 and Nasdaq Composite both edged higher, extending upward momentum following their longest weekly winning streaks since November 2021. Yesterday’s gains came despite downbeat economic updates from both the U.S. and China.
In commodities, oil is continuing its downtrend after falling about 5% in the previous two sessions. The potential rekindling of the Iran nuclear deal has raised concerns over rising oil supply, while recessionary concerns weigh on the demand outlook. A gauge of the U.S. dollar is adding pressure to oil prices after advancing 0.8% on Monday following last week’s sharpest five-day decline since May (-1.1%).
In other earnings this morning, home improvement retailer Home Depot Inc. (HD) is slipping 0.6% following its second-quarter earnings report. The home improvement retailer posted better-than-expected results despite a housing market slowdown, though the number of customer transactions declined. Home Depot maintained its guidance for the rest of the fiscal year. Meanwhile, investors will receive updates on the real estate market at 8:30 a.m. ET. Building permits and housing starts are expected to drop 3.3% and 2.1%, respectively in July as high inflation and recessionary fears weigh on demand.