US retail stocks battered as rate hikes hit consumers

Market Reports

by Tim McGowen

US stocks fell Tuesday after Walmart cut its earnings forecast, sending other retail shares lower and adding to concern that consumer spending might not be strong enough to keep the US out of a recession.

The Dow Jones Industrial Average fell 228.50 points, or 0.71 per cent, to 31,761.54. The S&P 500 retreated by 1.15 per cent to 3,921.05. The Nasdaq Composite declined about 1.87 per cent to 11,562.57. All of the major averages were still on pace for their best month of 2022.

Walmart plunged 7.6 per cent Tuesday and dragged other retailers with it. Target dropped 3.6 per cent, , Macy’s down 7.2 per cent.. The SPDR S&P Retail ETF fell nearly 4.2 per cent.

Across the sectors consumer discretionary was hit the hardest

The retail turmoil bled into e-commerce stocks. Shopify tumbled about 14.1 per cent after the payments provider announced it’s laying off about 10 per cent of its global workforce, citing a pullback in online spending and saying it misjudged how long the pandemic-fueled e-commerce boom would last. The company will report its earnings Wednesday.

Amazon fell 5.2 per cent. Square parent Block lost 7 per cent and PayPal 5.7 per cent both of which operate major merchant services businesses, UPS shares also slid 3.4 per cent after the shipping giant reported declines in its international and supply chain businesses.

On the flip side, Coca-Cola shares rose 1.6 per cent after the beverage giant topped earnings and revenue expectations, citing a sales volume recovery from the pandemic and higher pricing.
Industrial stocks were earnings winners, too. Shares of 3M rose 4.9 per cent after the company beat earnings and revenue estimates and announced plans to spin its health care business into a separate publicly traded company. General Electric posted better-than-expected results.

On Tuesday, the Federal Reserve commenced its two-day policy meeting. One analyst said ‘“The bottom line is the Fed, no matter how you cut it, is going to quickly move to that restrictive stance that will have a toll on the economy,”. “It’s going to get there quickly enough, whether it’s an extra 25 basis points next time versus a month later. Within the next six months we’re going to be in a financially restrictive environment.”

In commodity news, Natural gas prices are surging around the world as scorching temperatures stoke demand for the fuel, and as Europe’s push to move away from Russian fuel shakes global energy markets.
U.S. natural gas futures surged more than 11 per cent at one point on Tuesday to its highest level since July 2008. Natural gas is now on track for its best month on record
Iron ore is 7.7 per cent higher at US$111.70 tonne. Iron ore futures are pointing to a 2.5 per cent gain.
Gold prices were stuck in a narrow range on Tuesday with Spot gold was flat.
Silver was up $0.21 or 1.1 per cent to US$18.54 an ounce.
Copper was up $3.00 or 0.9 per cent to US$338.45 a pound.
Oil lost $1.72 or 1.8 per cent to US$94.98 a barrel.

Currencies

The $US Dollar index up 0.7 per cent with big gains vs euro while little change on yen cross. One Australian dollar has weakened compared to the US dollar yesterday, buying 69.40

The SPI futures are pointing to a 0.5 per cent fall.

Figures around the globe

Across the Atlantic, European markets closed mostly lower. Paris fell 0.4 per cent, Frankfurt dropped 0.9 per cent and London’s FTSE closed flat.

Asian markets closed mixed. Tokyo’s Nikkei lost 0.2 per cent, Hong Kong’s Hang Seng gained 1.7 per cent and China’s Shanghai Composite closed 0.8 per cent higher.

Yesterday, the Australian sharemarket added 0.3 per cent to 6,807.

Ex-dividends

There are three companies set to trade without the right to a dividend.

Kelly Partners Group Holdings (ASX:KPG) is paying 1.39 cents fully franked
Mirrabooka Investments (ASX:MIR) is paying 8.5 cents fully franked
Prospect Resources (ASX:PSC) is paying 79 cents unfranked

Dividends payable

There are three companies set to pay eligible shareholders today.

Premier Investments (ASX:PMV)
360 Capital Group (ASX:TGP)
360 Capital REIT (ASX:TOT)

IPO

There is one company set to make its debut on the ASX today. Keep an eye out for Sierra Rutile Holdings (ASX:SRX).

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
 

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.