Wall Street regained confidence in the consumer on Tuesday, August 16, buoyed by better-than-expected results in the retail sector, which pushed up the Dow Jones at the expense of technology.
According to several sources and final results at the close, the Dow Jones index gained 0.71% to 34,152.01 points and the broader S&P 500 index +0.19% to 4,305.20 points, while the tech-heavy Nasdaq gave up 0.19% to 13,102.55 points.
During this lightly traded mid-August session, investors were pleasantly surprised by announcements from retail giants Walmart and Home Depot, heavyweights of the Dow Jones, and put their money back into consumer-related stocks.
Walmart finally raised its annual earnings forecast three weeks after issuing an earnings warning that rocked the financial markets. The stock jumped 5.10% to 139.36 USD.
Walmart expects its annual operating profit to decline by 9% to 11%, less than the 11% to 13% it had previously forecast, a recovery attributed to large rebates, which helped clear excess inventory, and price increases on other products.
Several retail stocks gained momentum, such as Target stores (+4.55%) and semi-wholesale chain Costco (+1.33%). Amazon, an online retail major, also gained 1.12% to USD 144.78.
Meme, Home Depot was also highly sought after (+4.05% to 327.35 USD) as the home improvement chain reported quarterly results in line with expectations and said the strength reassured it of demand for home goods.
“You can’t say Walmart’s results were extraordinary, but it was better than expected, and Wall Street was too pessimistic,” said Gregori Volokhine, portfolio manager for Meeschaert Financial Services.
“Everyone was on energy, and no one was on retail anymore. We buried the consumer about 50 times, but for 49 times we shouldn’t have,” he said.
“As long as there is full employment, as long as inflation -even if it remains rampant-could start to slow down or be offset by wage increases, the consumer is still there, especially for Walmart,” a popular retailer, the analyst further indicated
On the other hand, the tech-dominated Nasdaq, which has led the rebound in stocks for the past month, has given up some ground.
“At some point, those who were well positioned in the Nasdaq and found themselves underexposed in perhaps less exciting growth sectors like retail or consumer rectified their positions,” Volokhine explained.
“We saw a little bit of profit taking” on technology, “allowing investment in sectors that were rebounding today.”
Meta (-0.79%), Netflix (-1.37%), Tesla (-0.89%) concluded in the red.
We find macroeconomic data such as the housing market again turned gray (-0.42% at the bottom of the table on Wall Street). Housing starts plunged by a larger-than-expected 9.6% annualized rate in July. Building permits, which presage future construction, fell by a slightly less alarming 1.6%.
On Wednesday, August 17, the markets will be watching for the minutes of the latest Fed monetary meeting, to be released on Wednesday, August 17, to better assess the future attitude of the U.S. central bank (Fed) on rates.
On the bond market, yields on Treasury bills were slightly lower than at the beginning of the session, at 2.81% compared to 2.78% the day before.
While in the United States, the purchase of hearing aids became possible without a prescription on Tuesday, 16 August, investors rushed to buy the manufacturers’ shares, such as Eargo (+77.19% to 2.02 USD).
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