Tuesday July 26th


Stock futures fall after Walmart cuts forecast, says inflation hit consumer spending

U.S. stock index futures fell on Tuesday morning after Walmart cut its profit forecast, sending retail stocks tumbling in the premarket. Dow Jones Industrial Average futures fell by 126 points, or 0.4%. S&P 500 futures lost 0.4% also and Nasdaq 100 futures declined 0.6%. A late Monday announcement from Walmart, which cut its quarterly and full-year profit estimates because of rising food inflation, alarmed investors who deliberated the implications for other retail stocks. The big-box retailer said higher prices are spurring consumers to pull back on general merchandise spending, particularly in apparel. Walmart plunged 9% in early morning trading and dragged other retailers with it. Target dropped 5.2%, and Amazon fell 3.7%. Kohl’s and Dollar General lost 4.5% and 3.6%, respectively, while Costco shed 3.1%. “Clearly, they have the wrong stuff, and they have to sell it more aggressively to clear that out, which looks like it’s going to take a pretty dramatic hit as a result of that,” Jeremy Bryan, senior portfolio manager at Gradient Investments, said during CNBC’s “Closing Bell: Overtime.” “The question is, how does this relate to the rest of the discretionary space?” Bryan added. Elsewhere, General Motors fell 3.6% in premarket trading after the company missed earnings estimates, citing supply chain disruptions stemming from Russia’s war on Ukraine and global Covid lockdowns. UPS shares fell 1.8%, despite the company posting earnings and revenue beats for the second quarter, after the shipping giant reported declines in its international and supply chain businesses. On the flip side, Coca-Cola shares rose 1.3% premarket after the beverage giant topped earnings and revenue expectations, citing a sales volume recovery from the pandemic and higher pricing. Shares of McDonald’s eked out a modest gain following mixed second-quarter results, in which net sales were hurt in part by the closure of locations in Russia and Ukraine, but international growth elsewhere fueled a rise same-store sales. Industrial stocks gave a positive showing too. Shares of 3M rose 3.7% after beating earnings and revenue estimates and announcing plans to spin its health care business into a separate publicly traded company. General Electric posted better-than-expected results citing recovery in the aviation industry that boosted its jet engine business. Its shares gained almost 5% premarket. Traders are also bracing for an onslaught of mega-cap tech earnings and economic data this week, as well as the outcome of the Federal Reserve meeting, that will help Wall Street direct its expectations for the rest of the year. “I think that there’s going to be a bifurcated market,” VantageRock Capital’s Avery Sheffield said during CNBC’s “Closing Bell: Overtime.” “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.” Stocks traded in a narrow range during Monday’s session, with the S&P 500 adding 0.1%. The Dow Jones Industrial Average climbed 90.75 points, or 0.3%. The tech-heavy Nasdaq Composite lagged, sliding 0.4%. All of the major averages are on track for their best month of the year. On Tuesday, the Federal Reserve will commence its two-day policy meeting. Traders are widely expecting a three-quarter percentage point hike. On the economic front, investors are expecting the latest reading of the Case-Shiller Home Price Index at 9 a.m. ET. The consumer confidence report and new home sales data are due out at 10 a.m. ET. Hong Kong stocks rose more than 1% as Asia markets mostly gained on Tuesday as South Korea’s gross domestic product beat estimates. Hong Kong’s Hang Seng index advanced 1.67% to close at 20,905.88, with heavyweight Alibaba jumping 4.82% after the company said in a press statement that it will be applying for a primary listing on the Hong Kong Stock Exchange, where its shares are already listed. Mainland China stocks also climbed. The Shanghai Composite was 0.83% higher at 3,277.44, while the Shenzhen Component rose 0.95% to close at 12,408.56. The Kospi in South Korea recovered from losses to rise 0.39% to 2,412.96, while the Kosdaq was fractionally higher at 789.93. Japan’s Nikkei 225 bucked the trend to decline 0.16% to 27,655.21, while the Topix index closed flat at 1,943.17. Oil prices rose on Tuesday for a second day on increasing concerns about tightening European supply after Russia, a key oil and natural gas supplier to the region, cut gas supply through a major pipeline. Brent crude futures for September settlement rose $1.66, or 1.6%, to $106.81 a barrel, extending a 1.9% gain in the previous day. U.S. West Texas Intermediate (WTI) crude futures for September delivery increased $1.75, or 1.8%, to $98.47 a barrel, having gained 2.1% on Monday. Gold prices held steady on Tuesday as bond yields fell a day before the U.S. Federal Reserve’s widely expected 75-basis-point rate hike. Spot gold was little changed at $1,719.77 per ounce by 1001 GMT. U.S. gold futures fell 0.1% to $1,718.00. “Gold is slightly higher benefiting from slightly lower U.S. interest rates,” said UBS analyst Giovanni Staunovo.