U.S. stocks fell on Wednesday to recoup some gains from the previous session after a series of disappointing quarterly results from some major retailers weighed heavier on wider markets. Investors also adopted the remarks of Federal Reserve officials, who confirmed their goals to curb inflation.
The S&P 500 fell more than 1.5%, after falling 2% a day earlier. The Nasdaq Composite fell 1.6 percent, while the Dow fell more than 400 points, or 1.4 percent, in the middle of the morning.
Movements declined as some weaker-than-expected profits from large retailers underscored the impact of inflation on corporate profits. Target (TGT) on Wednesday cut its year-over-year profit margin outlook as investment and transportation costs remain high, and estimates it could see an additional $ 1 billion in transportation costs this year due to rising fuel prices. And that came after Walmart (WMT), the largest retailer in the United States, reported weaker-than-expected quarterly earnings on Tuesday and cut its earnings forecasts for the year, citing higher wages, fuel costs and food. Shares of the two companies sank, drawing lower sympathy from competitors, including Costco (COST) and Dollar General (DG). The S&P Retail ETF (XRT) fell by more than 5% during the day, and the main consumer sectors of the S&P 500 and consumer sectors at discretion lagged behind.
The disappointing results outweighed the optimism of earlier this week, when investors adopted a series of optimistic reports on the US economy. At least the short-lived rally on Tuesday came after several solid reports showed that both consumer spending and production were holding back. Retail sales in the US rose 0.9% in April after a sharp revision of a monthly upward increase of 1.4% in March, suggesting that consumers continue to spend, although consumer prices are rising at the fastest pace of 80- those years of the last century. The latest footprint for US industrial production also surpassed estimates by 1.1% last month, or more than twice the expected increase.
The story continues
The reports reflect continued resilience in some key components of domestic action and have helped to allay, at least temporarily, fears that the US economy may inevitably collapse. And the still strong economic background has given the Federal Reserve more room to raise interest rates and otherwise tighten monetary policy to reduce inflation without fear of profound disruption to growth in other areas such as the labor market.
Fed chairman Powell told the Wall Street Journal on Tuesday that while “there may be some pain in restoring price stability”, he believes the Fed will be able to “maintain a strong labor market”. Powell also said there was “broad support” for two more 50-point interest rate hikes at the Fed’s next policy meetings, reiterating his opinion from the Fed’s last meeting earlier this month.
“I don’t think he said anything that caught us off guard … but let’s not forget where we are,” Ryan Detrick, LPL’s chief financial officer, told Yahoo Finance Live on Tuesday, noting that the S&P 500 fell six consecutive times. weeks pointing to this week. “It hasn’t been seven weeks in a row in 20 years, so we’re terribly oversold here. Then you come today and you have quite solid industrial production, you have quite solid retail sales. “It’s not perfect, but we just think so much about the negativity that is appreciated … it’s just a little overboard for us and we think it could be an opportunity for some of the long-term investors here.”
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10:39 a.m. ET: Housing starts slower than expected in April amid rising levels
US housing construction has started and all building permits were revoked in April, with rising interest rates and shortages of raw materials continuing to affect housing market activity.
The start of housing construction fell 0.2% a month in April to reach a seasonally adjusted annual rate of 1.724 million, the trade ministry said on Wednesday. This came after a revised downward decline of 2.8% in March. The start of single-family housing, a closely monitored measure for basic housing construction, fell 7.3% to 1.1 million.
Building permits, which point to future housing construction, fell by more than 3.2% in April to a seasonally adjusted annual rate of 1.819 million. In March, permits rose 0.3%, or an annual rate of 1.870 million.
“Start-ups and permits are likely to fall sharply over the next few months, following a decline in new home sales, which in turn follows the continuing rollover of mortgage applications,” wrote Ian Shepardson, chief economist at Pantheon Macroeconomics, in a note Wednesday morning. . . “Demand has probably not bottomed out yet, which allows for the usual delay between rising prices and the response from potential home buyers, so we believe sales and launches could easily fall by the end of the summer. mortgage numbers for the last year and a half, as home builders have taken advantage of the extreme shortage of inventory in the existing internal market, but this could not last much longer. “
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9:34 a.m. ET: Shares open lower, returning some of Tuesday’s earnings
Here are the main market movements at 9:34 AM ET:
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S&P 500 (^ GSPC): -47.92 (-1.17%) to 4,040.93
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Dow (^ DJI): -313.94 (-0.96%) to 32,340.65
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Nasdaq (^ IXIC): -167.82 (-1.40%) to 11,816.70
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Crude oil (CL = F): $ +1.42 (+ 1.26%) to $ 113.82 per barrel
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Gold (GC = F): – $ 8.10 (-0.45%) to $ 1810.80 per ounce
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10-year treasury (^ TNX): +1.4 bps for 2.9820% yield
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7:42 a.m. ET: Stock futures fall
Here is where the markets traded on Wednesday morning:
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S&P 500 futures (ES = F): -30.25 points (-0.74%) to 4054.50
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Dow futures (YM = F): -187 points (-0.57%) to 32,394.00
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Nasdaq futures (NQ = F): -130.74 points (-1.04%) to 12,429.50
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Crude oil (CL = F): +1.32 $ (+ 1.17%) to $ 113.72 per barrel
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Gold (GC = F): – $ 5.70 (-0.31%) to $ 1813.90 per ounce
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10-year treasury (^ TNX): + 2.7 bps for a yield of 2.997%
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7:38 a.m. ET: Lowe’s first-quarter earnings are disappointing as lower temperatures weigh on home improvement sales
Lowe’s (LOW), the country’s second-largest home improvement giant, posted best results that did not meet Wall Street expectations, as lower-than-average temperatures earlier this spring weighed in on some demand. Shares fell 2.3% in pre-market trading.
Comparable sales fell 4 percent in the first quarter, Lowe said, with the decline sharper than expected by 3.25 percent, according to Bloomberg. Only closely observed comparable sales in the US decreased by 3.8%. However, in the end, earnings per share of $ 3.51 exceeded expectations.
“Our sales this quarter were in line with our expectations, except for our seasonal outdoor categories, which were affected by the unusually low temperatures in April,” Lowe CEO Marvin Ellison said in a press release. “As 75% of our customer base is DIY, our sales for the first quarter were disproportionately affected by lower spring temperatures. Now that spring has finally arrived, we are pleased with the improved sales trends we see in May. “
Lowe’s confirmed its annual earnings forecast for the stock between $ 13.10 and $ 13.60. Comparable sales will range from 1% to 1%, Lowe added.
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7:32 a.m. ET: Mortgage applications have fallen the most since February last week
US mortgage applications have fallen the most since mid-February last week, as mortgage rates jumped to their highest level since 2009, deterring some refinancing individuals and buyers from the market.
The weekly index of the Association of Mortgage Bankers to track the volume of mortgage applications fell 11% week on week during the period ended May 13, according to the company’s latest report. Refinancing decreased by 10% compared to the previous week and decreased by 76% compared to the same week last year. Purchases, on a seasonally unadjusted basis, decreased by 12% compared to the previous week and by 15% compared to the comparable week in 2021.
“For borrowers who want to refinance, the current level of interest rates continues to be significantly demotivating,” said Joel Kahn, MBA’s associate vice president of economic and industrial forecasting, in a press release. “Purchase orders fell 12% last week, with future home buyers repelled by higher prices and deteriorating affordability. In addition, the general uncertainty about the short-term economic outlook, as well as the recent instability of the stock market, may lead some households to slow down the demand for housing. “
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7:22 a.m. ET Wednesday: Dedicated shares fall after company cuts year-over-year earnings guidelines due to higher costs
Target posted first-quarter earnings and year-round earnings guidelines that disappointed Wall Street, with higher spending expected to continue to reduce margins for the big retailer. Shares fell more than 20% in pre-market trading.
Target’s adjusted earnings reached $ 2.19 per share for the first quarter, which is below the forecast of $ 3.06, according to Bloomberg. However, like rival retail giant Walmart, quarter-on-quarter sales still exceeded forecasts, with comparable sales in the same store up 3.3% from an expected increase of 1.17%.
For the full year, Target now expects its full-year profit margin to be “in the range of about 6%,” the company’s earnings report said. This compares with a previous opinion of at least an 8% margin on operating income this year.
“Throughout the quarter, we faced unexpectedly high costs driven by a number of factors, which resulted in profitability that was well below our expectations and well below what we expect to work over time,” said Target CEO Brian Cornell. in a press release. . “Despite these short-term challenges, our team remains passionate about our guests and serving their needs, giving us continued confidence in our long-term financial algorithm, which provides for average single-digit revenue growth and an operating margin of 8% or more over time. of time. “
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