Stocks Ease as Walmart Plunges after Cutting its Profit Outlook

Morning Markets

September S&P 500 futures (ESU22) this morning are down -0.33%.  Weakness in retailer stocks weighs on the overall market, with Walmart plunging -9% in pre-market trading after cutting its profit outlook.  Stocks are also under pressure on expectations for the Fed to remain aggressive and raise its federal funds target range by +75 bp after the Tue/Wed FOMC meeting. 

Losses in stock indexes were limited as McDonald’s and Coca-Cola rose more than +1% in pre-market trading after reporting stronger than expected quarterly sales.  Also, General Electric jumped +4% in pre-market trading after reporting stronger-than-expected Q2 revenue.  In addition, a decline in T-note yields is supportive for stocks after the 10-year T-note yield fell to a 2-month low today at 2.723%. 

The Euro Stoxx 50 is down -0.40% today.  Weakness in European retailer stocks is weighing on the overall market today after Walmart cut its profit outlook.  Also, European bank stocks are under pressure today, led by a -7% drop in UBS AG after it reported weaker-than-expected profit.  In addition, concern that an energy crisis in Europe could spark a recession has intensified after Russia’s Gazprom PJSC said it would further curb gas flows to Europe through the Nord Stream pipeline to around 20% of normal capacity from Wednesday. 

China’s Shanghai Composite Index today closed up by +0.83%.  Strength in Chinese technology stocks today boosted the overall market after Alibaba climbed more than +6% due to its announcement that it will seek a primary listing in Hong Kong, a move that paves the way for Chinese investors to buy stock in the company directly.  Also, property stocks rallied for a second day today on signs that the Chinese government would provide support for the sector.  Bloomberg News reported today that a match-making meeting organized by the government-backed China Real Estate Association would meet with property developers and introduce potential models for relief programs. 

Japan’s Nikkei Stock Index closed down by -0.16%.  Japanese stocks fell slightly today as the market awaits Q2 corporate earnings reports. Also, trading activity was subdued ahead of the results of the Tue/Wed FOMC meeting.  Losses in stocks were limited after the Japanese government raised its monthly economic assessment in July for the first time in three months.

The minutes of the BOJ’s June policy meeting said monetary easing must be in place until wages rise and that they won’t hesitate to add easing if needed.  Also, a rapid yen weakening has a negative impact on the economy, and upward pressures from abroad on interest rates are expected to continue.

The Japanese government today raised its monthly economic assessment in July for the first time in three months, saying the economy is picking up moderately as consumption picked up despite a surge in Covid cases.

Pre-Market U.S. Stock Movers

Retailer stocks are falling in pre-market trading, led by a -9% slump in Walmart (WMT) after it said it sees Q2 adjusted EPS down -8% to -9%, and it sees full-year adjusted EPS down about -11% to 13%. Other retailers are weaker as well, with Target (TGT) and Etsy (ETSY) down more than -4%.  Also, Ross Stores (ROST) and TJX (TJX) are down more than -3%.  In addition, Costco Wholesale (COST) is down more than -2%.

Amazon.com (AMZN) is down more than -3% in pre-market trading after Morgan Stanley said Walmart’s cut in earnings is a “potential warning sign” for Amazon’s merchandise margins.  

Aaron’s (AAN) plunged more than -30% in pre-market trading after cutting its full-year revenue estimate to $2.19 billion-$2.27 billion from a prior estimate of $2.32 billion-$2.39 billion. 

UBS (UBS) tumbled -7% in pre-market trading after reporting Q2 net income of $2.1 billion, weaker than the consensus of $2.4 billion.

General Motors (GM) slid more than -1% in pre-market trading after reporting Q2 adjusted EPS of $1.14, below the consensus of $1.31. 

American Eagle Outfitters (AEO) dropped -7% in pre-market trading after Bank of America downgraded the stock to underperform from neutral.

Cryptocurrency-exposed stocks are falling in pre-market trading, with the price of Bitcoin down more than -4% at a 1-week low.  MicroStrategy (MSTR) is down more than -5%.  Also, Coinbase Global (COIN) is down more than -4%.  In addition, Marathon Digital (MARA) and Riot Blockchain (RIOT) are down more than -3%. 

F5 (FFIV) climbed nearly +8% in pre-market trading after reporting Q3 adjusted EPS of $2.57, better than the consensus of $2.23, and forecast Q4 adjusted EPS of $245-$2.57, well above the consensus of $2.29. 

General Electric (GE) jumped more than +4% in pre-market trading after reporting Q2 revenue of $18.65 billion, stronger than the consensus of $17.70 billion. 

McDonald’s (MCD) is up +1% in pre-market trading after reporting Q2 comparable same-store sales rose +9.7%, better than the consensus of +7.5%.

Coca-Cola (KO) climbed more than +1% in pre-market trading after reporting Q2 adjusted organic revenue rose +16%.  Stronger than the consensus of +8.19%, and raised its full-year adjusted organic revenue estimate to +12% to +13%, above the consensus of +10.3%. 

3M Co (MMM) rose more than +3% in pre-market trading after announcing that it will spin off its healthcare business.

Archer-Daniels-Midland (ADM) rallied more than +4% in pre-market trading after reporting Q2 adjusted EPS of $2.15, well above the consensus of $1.72.

Today’s U.S. Earnings Reports (7/26/2022)

3M Co (MMM), Alphabet Inc (GOOGL), Ameriprise Financial Inc (AMP), Archer-Daniels-Midland Co (ADM), Boston Properties Inc (BXP), Centene Corp (CNC), Chipotle Mexican Grill Inc (CMG), Chubb Ltd (CB), Coca-Cola Co/The (KO), Corning Inc (GLW), Ecolab Inc (ECL), Enphase Energy Inc (ENPH), Equity Residential (EQR), Essex Property Trust Inc (ESS), FirstEnergy Corp (FE), Fiserv Inc (FISV), General Electric Co (GE), General Motors Co (GM), IDEX Corp (IEX), Juniper Networks Inc (JNPR), Kimberly-Clark Corp (KMB), McDonald's Corp (MCD), Microsoft Corp (MSFT), Mondelez International Inc (MDLZ), Moody's Corp (MCO), MSCI Inc (MSCI), NVR Inc (NVR), PACCAR Inc (PCAR), Pentair PLC (PNR), PulteGroup Inc (PHM), Raytheon Technologies Corp (RTX), Stryker Corp (SYK), Teradyne Inc (TER), Texas Instruments Inc (TXN), UDR Inc (UDR), United Parcel Service Inc (UPS), Visa Inc (V), Zions Bancorp NA (ZION).

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