On Tuesday, the US stocks fell after Walmart cut its earnings forecast. This sends other retail shares lower while causing concern that consumer spending may not be sufficient enough to put the US out of recession.
Walmart agrees it has cut its quarterly and yearly profit estimates on Monday due to increasing food inflation, alarming investors to deliberate on other retail stocks’ implications.
The company, regarded as a big-box retailer, expressed that higher prices are making consumers pull back on their overall merchandise spending, especially in apparel.
On Tuesday, the company fell 8% and dragged others with it. In particular, Target and Kohl’s dropped about 5%, Amazon and Dollar General plunged 4%, while Costco fell 3%. The SPDR S&P Retail ETF also fell by over 4%.
Reacting to the Walmart announcement, Robert Cantwell, portfolio manager at Upholdings, disclosed, “The most important thing from the Walmart announcement is how inflation is changing what people buy. Food now makes up a bigger share of individuals’ budgets, but overall spending still generally remains intact.”
Cantwell added, “The general trend in the market right now is most companies are coming in below estimates, but not as badly as the market feared.”
Other retailers also fell
General Motors went down by 4% after it missed earnings estimates. The company cited supply chain disruptions from the Russian-Ukraine war and Covid lockdowns.
For UPS, its shares fell 3%. Despite its posting revenue and earnings beats for the 2nd quarter, it reported declines in supply chain and international businesses.
On the other hand, Coca-Cola shares increased 1% after it topped revenue and earnings expectations. The company cited a sales increase recovery from the higher pricing and Covid-19 pandemic.
McDonald’s shares added almost 1% after its mixed 2nd-quarter results saw net sales hurt in part by its location closure in Ukraine and Russia, but global growth elsewhere caused its rise in same-store sales.
Also, the Industrial stocks witnessed a positive showing. 3M shares increased to 6% after beating revenue and earnings estimates and disclosing plans to spin its health care businesses into a different publicly traded firm.
In the same vein, General Electric posted better results beating expectations. The company cited that the aviation industry recovery boosted its business, as its shares gained 4%.
Meanwhile, traders are bracing to see an onslaught of big-cap tech economic data and earnings this week, including the Federal Reserve meeting outcome, which would help Wall Street control its rest of the year expectations.
“I think there’s going to be a bifurcated market. I think the bottom might be in certain stocks, but nowhere in others. So this actually could be one of the most dynamic earnings seasons we’ve seen in a long time.” VantageRock Capital’s Avery Sheffield said during CNBC’s “Closing Bell: Overtime.