4:15pm: Walmart cuts profit guidance
The Dow closed Tuesday down 228 points, 0.7%, at 31,762, the Nasdaq Composite lost 220 points, 1.9%, to 11,563 and the S&P 500 slid 46 points, 1.2%, to 3,921.
Investors reacted to Walmart Inc cutting its quarterly and full-year profit projections on Monday, citing food inflation. Shares of the retail giant fell more than 7% and rippled through the sector.
“The most important thing from the Walmart announcement is how inflation is changing what people buy,” said Robert Cantwell, portfolio manager at Upholdings, according to CNBC. “Food now makes up a bigger share of individuals’ budgets, but overall spending still generally remains intact.”
12:05 pm: US stocks down as Street anticipates Fed interest rate decision
All three major US indices are in the red midday, as the Street prepares for an interest rate policy decision from the US Federal Reserve, and tech giants Alphabet and Microsoft get ready to post earnings.
The Dow Jones was down at 0.7% at 31,773 points, the S&P 500 was down 1.2% at 3,917 and the Nasdaq Composite was down 1.9% at 11,561.
The Fed’s two-day policy meeting is expected to see a 75 basis point hike to interest rates. Meanwhile, US consumer confidence in July came in at 95.7, falling from 98.4 in June, while new home sales fell again, down by 8.1%, while the May numbers were revised lower to 6.3%.
At midday, the major movers included the S&P seeing General Electric up 7%, but Walmart falling by 8.7% on poor second quarter results. Nasdaq saw Fiserv Inc up by 3.8% but Zscaler down by 6.5%. Over at the Dow, 3M Co was up 7% but again, Walmart was in the lead position, down 8.7%.
Michael Hewson, chief market analyst at CMC Markets UK, wrote in a note that Walmart shares are “giving us a flavour of what to expect in the event of a miss tonight, with their shares sharply lower after the US retailer warned about its profits for Q2 and the rest of 2023.”
Hewson noted Walmart’s operating margins for Q2 have been revised lower to 4.2% and below 4% for the rest of the year, although sales are expected to be higher, 7.5% for Q2 and 4.5% for the rest of the year. Walmart said that spending on food and energy was now making up a much higher proportion of basket spend, leaving less money for higher value and margin items.
Earlier this month, Microsoft downgraded its Q4 revenue guidance from $52.4bn to $51.94bn, citing the effects of a stronger US dollar, on what would still be a record number. Investors will be looking specifically at its cloud business that has been a key revenue driver the past two years, and where it also competes with Google owner Alphabet, according to Hewson.
Hewson also noted Alphabet could face pressure from a drop in advertising across all its platforms, including YouTube. Investors will also be looking for evidence of growth in its own cloud business.
11.50am: Proactive North America headlines:
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Northstar Gold says it has moved one step closer to over 1M ounce gold resource at its Miller project in Ontario
Appia Rare Earths and Uranium Corp says initial 2022 drilling at Alces Lake rare earth property in northern Saskatchewan is completed
Co-Diagnostics set to expand OEM deal with Bio Molecular Systems at AACC expo
Psyched Wellness reveals new preliminary data highlighting important functional properties of AME-1 extract
Gungnir Resources drills new ultramafic horizon just north of Lappvattnet nickel deposit in Sweden
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ImagineAR adds former Red Sox star David Ortiz to FameDays.com's roster of hologram-able celebrities
TNR Gold Corp enters agreement to sell part of net smelter returns royalty at Mariana lithium project
Predictive Oncology appoints Dr Julia Kirshner as its new chief scientific officer
Fireweed Metals kicks off 2022 drilling at the Macmillan Pass project in the Yukon
Zoglo's Incredible Food says to add plant-based products at Healthy Planet stores
TRACON Pharmaceuticals enrols 36th patient at ENVASARC trial triggering 4Q interim efficacy analysis
Renforth Resources hails this summer's prospecting work at Surimeau battery metals project in Quebec
PlantX Life says it has obtained debt financing of up to $10M from an arm's length creditor, no longer pursuing non-brokered private placement
Versus Systems granted 20 new claims by US patent office for streaming media rewards platform
TraceSafe Technologies rolls out novel carbon emissions calculator as globe races to 'net zero'
Electra Battery Materials signs benefits agreement with Metis Nation of Ontario
Royal Helium gets approval for Climax/Nazare project from government of Saskatchewan
Marvel Discovery mobilizes crew to confirm historical showings at Duhamel nickel-copper-cobalt property in Quebec
Unigold announces non-brokered private placement of up to 20,000,000 units for gross proceeds of up to $1.6 million
9.35am: Earnings continue to set the tone
US stocks opened lower as corporate earnings continued to roll in from key companies such as McDonald’s Corporation and Microsoft Corporation ahead of the Fed’s interest rate decision on Wednesday.
Just after the open, the Dow Jones Industrial Average had slipped 98 points at 31,892 points, while the S&P 500 was down 25 points at 3,942 points and the Nasdaq Composite had shed 120 points at 11,663 points.
Shares of McDonald’s were relatively flat, down about 0.5% at the open, after the fast food giant posted its 2Q earnings which showed a 9.7% increase in international sales, while earnings per share came in above analyst expectations and revenue fell short.
Meanwhile, retail stocks had fallen sharply in pre-market trading after Walmart Inc slashed its profit outlook late on Monday. At the open, Walmart had plunged about 8%, Best Buy Co Inc was down about 4%, and Target Corporation had slipped about 5%.
6.30am: Earnings, earnings, earnings
US stocks were expected to open lower on Tuesday ahead of some key quarterly earnings figures from the likes of McDonald's and Microsoft.
Beyond the earnings, investors are also looking to the Federal Reserve’s interest rate verdict and accompanying statement on Wednesday for direction.
Futures for the Dow Jones Industrial Average were trading 0.4% lower pre-market, while those for the broader S&P 500 index were 0.2% down, and futures for the tech-laden Nasdaq-100 also shed 0.2%.
“As for today, the focus continues to remain on earnings; Coca-Cola, McDonald’s, and General Motors will report their earnings before the market open,” said Naeem Aslam, chief market analyst at avatrade.com.
“Tech stocks such as Microsoft and Alphabet will report their numbers after the market close. Chipotle Mexican Grill, UPS, and Enphase Energy will report their earnings after the market bell,” he added.
Given the sheer volume of quarterly results due today, trading has turned cautious. In part, Walmart’s results and its warning about falling customer numbers on Monday continue to spook markets.
“Walmart cut its profit forecast due to rising food inflation and painted a highly gloomy picture for the US economy. This is despite the fact that President Biden doesn’t think that the US economy will face a recession,” added Aslam.
Beyond today, all eyes are on the US rate-setters. The Fed is widely expected to raise interest rates by 75 basis points on Wednesday as it tries to tame inflation. The key question is whether such a hike will have the desired effect of tackling inflation which is currently at multi-decade highs.
“By default, traders are expecting an interest rate hike of 75 basis points from the Fed. As long as the Fed delivers on that, there will be no surprise for traders,” said avatrade.com’s Aslam. “What matters the most is their forward guidance for their rates, which means by how much they will increase the interest rate after that. Will there be an interest rate hike of 50 basis points, or will there be an increase of 75 basis points?”
The Fed’s two-day meeting kicks off today, culminating in a rate decision and accompanying statement on Wednesday.
In energy markets, WTI crude oil futures were 1.9% higher at $98.54 a barrel, while Brent crude futures were up 1.6% at $106.84.
Contact the author at jon.hopkins@proactiveinvestors.com