Here are the most important news, trends and analysis that investors need to start their trading day:
1. Stock futures fall as inflation claims another retailer
Traders on the floor of the NYSE, May 17, 2022.
Source: NYSE
U.S. stock futures dropped Wednesday as rising inflation slammed another retailer. Target sank more than 20% in the premarket, shortly after a big earnings miss. A similar profit picture at Walmart was revealed Tuesday. The Dow stock closed down nearly 11.4% in its worst single-session decline since 1987. Walmart shares lost another 1.5% in Wednesday’s premarket. One of the drivers behind spiking inflation is energy costs. U.S. oil prices jumped 2.5% on Wednesday, topping $115 per barrel once again.
Despite Walmart’s troubles, the Dow Jones Industrial Average on Tuesday rose 431 points or 1.3%. The S&P 500 and the Nasdaq gained 2% and nearly 2.8%, respectively, in Wall Street’s latest attempt at a recovery following weeks of steep losses. The Nasdaq was still in a bear market as defined by a drop of 20% or more from its prior high. The Dow and S&P 500 were still in corrections, defined by a decline of 10% or more from prior highs.
2. Target is the one getting slammed Wednesday on a big earnings miss
Employees assist customers at the checkout area of a supermarket on May 11, 2022 in New York City.
Liao Pan | China News Service | Getty Images
Target’s premarket stock plunge came after the retailer Wednesday morning reported adjusted first-quarter earnings that fell well short of estimates. The company’s profit was hampered by pricey freight costs, higher markdowns and lower-than-expected sales of discretionary items from TVs to bicycles. Like Walmart on Tuesday, which also cited inflationary and higher inventory pressures, Target’s revenue exceeded estimates. Target reiterated its sales forecast, which calls for mid single-digit growth on a percentage basis this year and beyond.
3. Lowe’s is also under pressure after weaker-than-expected sales
Pallets of garden supplies sit stacked in the parking lot of a Lowe’s store in San Bruno, California.
David Paul Morris | Bloomberg | Getty Images
Unlike Home Depot’s strong quarter and guidance a day earlier, rival Lowe’s on Wednesday morning delivered first-quarter revenue that missed expectations. Lowe’s shares dropped 2% in the premarket. The company saw cooler spring weather hurt demand for supplies for outdoor do-it-yourself projects. Home Depot held up as pro sales outpaced DIY. Lowe’s, which gets about 75% to 80% of its total sales from DIY customers, did beat on earnings. The company reiterated its full-year outlook for sales between $97 billion and $99 billion.
4. Slowing housing data expected as Fed chief Powell talks tough on rates
Lumber at the site of a house under construction in the Cielo at Sand Creek by Century Communities housing development in Antioch, California, U.S., on Thursday, March 31, 2022.
David Paul Morris | Bloomberg | Getty Images
The government’s April housing starts and building permits report, out at 8:30 a.m. ET, is projected to show a decline in building activity. Economists expect a 2.4% decline to an annual rate of 1.75 million units. Housing starts had edged higher by 0.3% in March. Building permits in April are seen dropping 2.8% to 1.82 million. Permits rose 0.4% in March.
- Weekly mortgage demand from homebuyers tumbles 12%, as higher rates took their toll. It was the first weekly drop in about a month. Inflation isn’t helping consumers feel particularly flush either. Refinance applications continued their slide, down 10% for the week.
The 10-year Treasury yield rose Wednesday, right around 3%. The strength in the benchmark yield can be attributed to comments from Federal Reserve Chairman Jerome Powell. In a Wall Street Journal interview Tuesday, Powell said the central bank won’t hesitate to keep hiking interest rates until inflation comes down.
5. JPMorgan investors send CEO Jamie Dimon a message about pay
JP Morgan CEO Jamie Dimon speaks at the Boston College Chief Executives Club luncheon in Boston, Massachusetts, U.S., November 23, 2021.
Brian Snyder | Reuters
JPMorgan Chase’s Jamie Dimon was handed a rare rebuke late Tuesday as shareholders expressed their disapproval of his $52.6 million retention bonus. Just 31% of investors participating in JPMorgan‘s annual shareholders meeting supported the award that was part of the chairman and CEO’s 2021 compensation package and designed to keep him at the helm for another five years. While the vote was nonbinding, JPMorgan’s board said it takes investor feedback “seriously” and intended Dimon’s bonus to be a one-time event.
— CNBC’s Sarah Min, Pippa Stevens, Melissa Repko and Hugh Son contributed to this report.
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