Daily Markets: Retail Earnings Come Into Focus

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session mixed. Hong Kong’s Hang Seng fell 1.05% on Health Services weakness while a few markets were essentially flat as Japan’s Nikkei declined 0.01%, Taiwan’s TAIEX gained 0.02% and China’s Shanghai Composite rose 0.05%. South Korea’s KOSPI advanced 0.22% and Australia’s ASX All Ordinaries was up 0.51% as India’s Sensex closed 1.68% ahead on Energy and Financials strength. By mid-day trading, major European equity indices are up across the board and U.S. futures point to a soft open later this morning.

Before President Biden signs the $750 billion Inflation Reduction Act into law today, investors will be digging into quarterly results from Home Depot (HD) and Walmart (WMT), two high profile retailers that will lead the wave earnings reports from consumer-focused companies. In addition to how their results relate to consensus expectations, the read through on efforts to reduce bloated inventories, the corresponding impact on margins, comments on the consumer, and expectations for the seasonally strong shopping season will be in focus. Those results, comments and guidance will likely reshape expectations for the coming days, as will tomorrow’s July Retail Sales report, one whose trailing three-month data offers a yardstick by which to judge quarterly retail earnings. Underlying all of that will be the release of the Fed’s July monetary policy meeting minutes tomorrow.

Data Download

International Economy

The ZEW Indicator of Economic Sentiment for the Euro Area slipped to -54.9 in August vs. -51.1 the prior month but came in ahead of the expected -57 reading. The August figure marked the lowest reading since November of 2011, as the economic outlook is expected to worsen further amid ongoing concerns about the energy crisis in Europe and the ECB's ongoing hiking cycle. 

Germany’s ZEW Indicator of Economic Sentiment for Germany fell to -55.3 in August vs. -53.8 in July, the lowest since October 2008 and below market expectations of -53.8. The current conditions subindex fell to -47.6 from -45.8 the prior month. High inflation rates and the expected additional costs for heating and energy lead to a decrease in profit expectations for the private consumption sector. 

Domestic Economy

At 8:30 AM, we’ll get two pieces of July economic data. July Housing Starts are expected to dip 2% MoM to 1.54 million from 1.559 million the prior month, while Building Permits are also forecasted to retreat to 1.650 million from June’s 1.696 million. 

Minutes before the opening bell is rung to start today’s trading, the July Industrial Production report will be released, and it’s expected to rise 0.3% vs. the 0.2% decline reported in June. We’d remind readers that want to focus on the manufacturing sector to parse the data contained in this report as the headline figure combines manufacturing, utility, and mining production data. 

Markets

Energy names fell 2.00% yesterday and Materials were down slightly but the rest of the market had a moderately positive day. As a result, we saw the Russell 2000 gain 0.23%, the S&P 500 advance 0.40%, the Dow rise 0.45% and the Nasdaq Composite finished the day up 0.62%. Looking at companies that stood out yesterday, Walt Disney Company (DIS) had a strong day off earnings and contributed to roughly 38% of Communications Services sector returns. Tesla (TSLA) once again was a big contributor to the Consumer Discretionary sector with its 3.10% gain accounting for just over 109% of sector returns.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -6.68%
• S&P 500: -9.84%
• Nasdaq Composite: -16.09% 
• Russell 2000: -9.97%
• Bitcoin (BTC-USD): -49.62%
• Ether (ETH-USD): -39.92%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Home Depot (HD), Melco Resorts & Entertainment (CLCO), and Walmart (WMT) will be among the companies issuing their latest quarterly results and guidance. 

While ZipRecruiter’s (ZIP) June quarter results came in ahead of consensus expectations, the company issued downside guidance for both the current quarter and 2022 citing a “difficult macroeconomic backdrop of increasing inflation, rising labor costs and interest rates” having a more pronounced impact on the hiring environment in the second half of 2022. The company now sees 2022 revenue in the range of $883-$897 million vs. the $912.7 million consensus.

Uber (UBER) announced it will increase driver rates across London and the UK as well as make changed to peak hours and minimum fares as it looks to attract 8,000 more drivers to meeting growing demand. 

Shares of clinical diagnostics company SomaLogic (SLGC) came under pressure after it slashed its 2022 revenue guidance due to ongoing variability in core service business, macroeconomic and commercial factors. 

Shares of Warner Bros. Discovery (WBD) ticked higher in aftermarket trading last night following a report by Variety HBO Max will downsize its reality programming department.

Navitas Semiconductor (NVTS) announced the acquisition of GeneSiC Semiconductor, a silicon carbide pioneer with expertise in SiC power device design and process, for $100 million, 24.9 million shares of NVTS stock and a possible earn out payment.

IPOs

GigaCloud Technology (GCT) and Innovative Eyewear (LUCY) could price their respective IPOs this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Agilent (A) and Jack Henry (JKHY) are expected to report their quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Wednesday, August 17

• Japan: Core Machinery Orders – June
• Japan: Imports/Exports – July
• UK: CPI, PPI – July
• Eurozone: 2Q 2022 GDP
• US: Weekly MBA Mortgage Applications 
• US: Retail Sales – July 
• US: Business Inventories – June 
• US: Weekly EIA Crude Oil Inventories 
• US: Federal Reserve FOMC Meeting Minutes - July

Thursday, August 18

• Eurozone: CPI - July
• US: Weekly Initial & Continuing Jobless Claims
• US: Philadelphia Fed Index – August
• US: Existing Home Sales – July 
• US: Weekly EIA Natural Gas Inventories 

Friday, August 19

• Japan: CPI – July
• UK: Retail Sales – July
• Germany: PPI - July

Thought for the Day

“Anyone who isn’t embarrassed of who they were last year probably isn’t learning enough.” ~ Alain De Botton

Disclosures

• Apple (AAPL), Walmart (WMT) are constituents of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Earnings Stocks Economy Central Banks