Wall Street mixed as retailers rally on strong earnings, growth stocks fall amid rallying yields
U.S. equity markets were mixed on Tuesday, as strong profits at major retailers and better-than-expected U.S. industrial production growth in July lifted stocks sensitive to perceptions about the health of the U.S. economy, but a subsequent rise in US bond yields hit big rate-sensitive tech/growth names. The end result was that the Nasdaq 100 index was last down about 0.3%, after hitting new multi-month highs above 13,700 earlier in the session, but the Dow Jones last rose about 0.7%, after hitting its highest levels since mid-April. in the 34,200s.
The S&P 500 index last changed hands near flat near 4,300, having also hit its highest levels since mid-April at 4,325 earlier in the session, before finding resistance at its 200-day moving average at 4,326. The last time the benchmark US index hit its 200DMA was on April 21, and at current levels the S&P 500 is trading up about 18% from from yearly lows in the 3,600s posted in June.
Earnings that have held up better than expected, as demonstrated by the most recent Walmart and Home Depot, proof that the United States is holding up better than expected in the face of extreme price pressures, and proof that soaring inflation this year has peaked and is now expected to ease. all have contributed to the recent rise. In short, optimism has grown about the ability of the US economy to achieve a so-called soft landing, where the Fed is able to bring inflation under control without having to raise interest rates. excessively high and risk a recession.
Walmart jumps 5.5%, Home Depot jumps 4.1%
Share prices of two of the largest U.S. retailers, Walmart and Home Depot, both jumped on Tuesday after both posted better-than-expected results ahead of the U.S. trade open. Walmart’s downgrade to its new full-year earnings forecast hasn’t been as bad as expected, with the company issuing a profit warning only a few weeks ago. Meanwhile, Home Depot beat earnings estimates despite declining store footfall amid higher prices.
Strong earnings from Walmart and Home Depot helped companies like Lowe’s, Target and TJX and Kroger also post strong intraday gains. This helped lift the consumer staples and consumer discretionary sectors of the S&P 500 GICS, which were the best performers after gaining 1.2% and 0.9% respectively. The worst performing sectors were information technology (-0.6%), communication services (-0.3%), healthcare (-0.4%), energy (- 0.4%) and real estate (-0.5%).
As for some of the big names, Microsoft, Alphabet and Apple fell 0.5%, while Tesla fell closer to 1.0%. Amazon nearly gained 1.0%, thanks to the bullish tone in the retail sector.