Retail sales rose in April by 0.9%, the Commerce Department reported today. And Walmart (WMT) reported stronger than expected same store sales for the first quarter with an increase of 5.6%. But…
Ok, the bad news on profit margins from Target (TGT) was a big deal. No argument. When you’re operating margin falls to 5.37% when Wall Street was projecting 9.5%, it’s a big deal. And after yesterday’s earnings miss from Walmart (WMT), it’s reasonable to extrapolate and say the entire economy and stock market has a cost, inflation, and margin problem. But that doesn’t mean that every company has the same degree of problem. And it certainly doesn’t justify selling everything–and selling to the tune of big losses–shares of every company that sells stuff to consumers. And tomorrow, or the next day, I expect a little more analysis and discrimination in the market. Some of the stocks hit hardest today should rebound handily on that rethink. I’d put PepsiCo (PEP) and Coca-Cola (KO) at the head of that group.
My one-hundredth-and-thirty-sixth YouTube video “Looking for a wider credit crunch” went up today. I think last week’s video worrying about a credit crunch in the consumer economy was a bit too optimistic. I’m now seeing signs in the market of a wider credit crunch. In this video, I look at the junk bond market and its reflection in Bausch (BHC) as a test case as well as the trend in profits for the S&P 500. And another default in China’s property development sector as well as the possibility that the default by Sri Lanka is just the first sign of emerging market distress
As of 3:30 p.m. Wednesday May 18 shares of Target (TGT) were down 25% for the day after the company reported a big earnings miss for the first quarter. Let’s be clear. The sales picture at Target was very positive for the quarter. Same store sales were up 3.3% in the quarter. That was about three times higher than Wall Street analysts had expected. Revenue was up 4%. Here again Target’s $25.2 billion in revenue beat expectations for $24.3 billion in revenue. But earnings were terrible at $2.19 a share versus forecasts for $3.05 a share.
New registrations for electric vehicles jumped 60% in the first quarter of 2022 from the first quarter of 2021. according to Experian Automotive. Electric vehicles made up an all-time record 4.6% of the total market. The news was even more positive given that overall new vehicle registrations were down 18% in the quarter from the first quarter of 2021.
Today, Tuesday May 17, China’s top economic official, Vice Premier Liu He, said that the government will support the development of digital economy companies and their public stock listings. The comments delivered after a symposium with the CEOs of some of the country’s largest private technology companies came just a day after the National Bureau of Statistics reported that industrial output fell 2.9% in April from April 2021, and that retail sales contracted 11.1%. Financial markets in China and the United States interpreted the remarks as a public show of support for China’s Internet companies
In my weekend Saturday Night Quarterback I said that this week would, probably, answer the question of whether Friday’s big bounce was just a bounce, the start of a buy on the dip rally, or even a bear market rally with a bit of staying power. Two days into the week I think the market action is moving in favor of a bear market rally, one of those often quite powerful upside moves that punctuate extended bear markets.