Foot Locker, Deere shares profits
(Friday Market Open) Stock index futures fell ahead of the open as investors scrutinize competing messages from the Fed this week on how high September’s rate hike could reach. It’s also a big day for options expiration, so be prepared for possible turbulence before the close.
Market potential movers
The last big earnings stories of the week had one big hit and one miss.
- Foot locker (FL) soared 23.67% before the bell on an earnings beat and news that former Ulta Beauty (ULTA) CEO Mary Dillon will become FL’s new CEO on September 1.
- Deere (DE) was down 3.56% premarket after slashing its full-year forecast; the company reported earnings below estimates for the quarter on revenue above consensus.
Fashion retailer shares Loop (BKE) rose 4.59% premarket ahead of its earnings announcement later today.
As summer draws to a close, there is still a month to go before the next Federal Open Market Committee (FOMC) meeting and rate decision, with plenty of guesswork ahead until the magnitude of the almost certain rate hike is clear.
near the open, S&P 500 Futures Contracts were down 0.86%, Dow Jones Futures decreased by 0.63% and Nasdaq Composite Futures were down 1.01%. The 10-year Treasury yield rose slightly to 2.967% while WTI crude oil was down 1.62% at $89.03 a barrel.
Elsewhere in the market, the dramatic saga that is Bed bath and beyond (BBBY) continued with a 35% decline in premarket trading after investor and Chewy.com founder Ryan Cohen yesterday confirmed the sale of his 7.78 million share stake in the company, which caused BBBY to fall 30% at the close. Recent reports have noted that Cohen’s past call option buying has likely fueled BBBY’s stock buying in recent weeks.
Starbucks (SBUX) fell 1.08% premarket as the management reshuffle continues under Howard Schultz in his role as interim CEO. The international coffee chain announced on Thursday that it was cutting the position of chief executive of the business, following the former CEO’s retirement earlier this year.
Meanwhile, the crypto winter might be back. Bitcoin, the largest cryptocurrency by market capitalization, dipped below $22,000 on Friday to hit a two-month low.
And in a sign that people might want to stock up on winter sweaters, natural gas price are now at 14-year highs due to extreme weather conditions in Europe and the Far East.
Market Minutes Review
Mixed economic data and seemingly mixed views from Federal Reserve officials on the future pace of rate hikes led to a choppy session on Thursday, although all major stock indexes ended slightly ahead.
The S&P 500® Index (SPX) gained 0.23%, the Dow Jones Industrial Average ($DJIA) increased slightly by 0.06%, the Nasdaq ($COMP) gained 0.21%, and the Russell 2000 (RUT) added 0.68%.
During this time, the US dollar index ($DXY) ended at 107.5, the highest level in a month.
After better-than-expected numbers before the opening of weekly unemployment insurance claims and the Philadelphia Fed’s manufacturing index, the National Association of Realtors reported that sales of existing homes in the United States fell in July for the sixth straight month, the longest downward move since 2015 not counting the first three months of the pandemic. Second-hand home sales fell 5.9% in July from June to a seasonally adjusted annual rate of 4.81 million.
While homeowners may not be happy with these results, the Fed could see the housing slowdown as yet another sign that its efforts to slow inflation are finally producing consistent results. The central bank‘s July minutes released on Tuesday relieved investors that while rate hikes would likely continue through 2023, the Fed could moderate based on new data along the way.
Yet on Thursday, two central bank officials indicated in separate appearances that there was still a healthy debate about the direction of rate increases. In a the wall street journal interview published yesterday, St. Louis Fed Chairman James Bullard remained hawkish for a 75 basis point hike at the upcoming Federal Open Market Committee meeting and rate announcement scheduled for September 21 . Meanwhile, Kansas City Fed President Esther George appeared to take a more cautious stance in public comments yesterday on the size and pace of rates ahead, saying the central bank has already “done a lot” and should bear in mind that its political decisions “operate with a lag”.
The technology and semiconductor sectors grew, driven by Wolfspeed (WOLF), which is up more than 30% after better results in the fourth quarter and an increase in its forecast for the year ahead. Cisco (CSCO) gained another 5.81% on Thursday after a better-than-expected performance on revenue and profit and a better-than-expected forecast for the year ahead.
Kohls (KSS) was down another 7.72% at Thursday’s close after again cutting its full-year profit forecast due to how inflation appears to be hurting its key mid-market clients.
After gaining 2.14% in yesterday’s regular session, Applied materials (AMAT) beat sales and earnings and rose another 1.92% in after-hours trading. Ross Stores (ROST) lost 0.97% in the extended session after missing earnings but finishing ahead of earnings estimates.
In anticipation of today’s earnings announcement, shares of Deere (DE) gained 0.90%, Foot locker (FL) lost 1.45%, and Loop (BKE) fell 1.45% at Thursday’s close.
Three things to watch out for
ARE LAYOFFS BACK? A survey released Thursday by global consultancy PwC found that half of executives and board members were downsizing or considering it, while 52% said they were freezing new hires. After surveying more than 700 U.S. executives and board members, PwC also reported that more than 40% rescinded job offers and a similar amount reduced or eliminated signing bonuses that were popular in the US. when the labor market was tight. In its coverage of the results, Bloomberg pointed to a bright spot: About two-thirds of companies are raising wages or expanding mental health benefits, which could help if payrolls are about to shrink.
PHANTOM OF THE CLOSURE: Redfin says purchase deals between home buyers and sellers are derailing at the highest level since the start of the COVID-19 pandemic. The real estate company said that nationwide, 63,000 home purchase contracts failed in July, or 16.1% of homes under contract that month. With the housing market clearly cooling, things appear to be getting tense – Redfin said buyers are “more likely to cancel a deal if a seller refuses to lower the price or make requested repairs”.
INFLATIONARY BABIES: The cost of raising kids through high school just topped $300,000, and yes, we have 40 years of high inflation to thank for that. The the wall street journal reported this morning data from the Brookings Institution that a middle-income married couple with two children would spend $310,605, or an average of $18,271 per year, to raise a younger child born in 2015 to age 17 years old. Log, this calculation uses “a previous government estimate as a benchmark, with adjustments for inflation trends”. Those who suddenly think of buying a refrigerator lock may not be the only ones.
Notable Calendar Items
August 22: Palo Alto Networks (PANW) Earnings
August 23: New Home Sales and Earnings of Intuit (INTU), Medtronic (MDT), Advance Auto Parts (AAP), Dick’s Sporting Goods (DKS) and Toll Brothers (TOL)
August 24: Durable goods orders, pending home sales and revenue from Nvidia (NVDA), Salesforce.com (CRM), Snowflake (SNOW) and Autodesk (ADSK)
August 25: Gross domestic product (GDP) and revenues of Dollar General (DG), Workday (WDAY), Dollar Tree (DLTR), Ulta Beauty (ULTA), Burlington Stores (BURL) and Gap (GPS)
August 26: PCE Price Index, Michigan Consumer Sentiment, Personal Income, and Marvell Technology (MRVL) and Dell (DELL) Earnings
TD Ameritrade® Commentary for educational purposes only. SIPC member.
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