Global markets were mostly flat overnight, as US markets (S&P 500 Index +0.1%) edged higher, recovering from a small loss as investors brace themselves for a busy week ahead of mega-cap tech earnings, the US Fed’s interest rate decision, and second quarter US GDP data.
Tech shares led losses with the NASDAQ index down -0.6%, following weak tech earnings on Friday while oil and utilities helped offset market-wide losses.
In after-hours trade retail stocks were hit hard following Walmart’s profit downgrade, with Target down -6%, and Amazon slipping -3%.
European markets (Stoxx 600 Index) were flat on a mixed day of trade, paring back losses as gains across bank shares were offset by travel and leisure stocks.
Walmart (WMT:NYSE)
Retail giant Walmart shares are currently down -9% in after-hours trade after delivering a weak guidance update, cutting its profit guidance for the second quarter (Full result due in August) and full-year profit. Second quarter sales are expected to rise +6%, (excluding fuel) as customers buy more groceries (which have lower margins) and fewer discretionary items like electronics and clothing, with more discounting required to offload bloated inventory levels.
Walmart expects 2023 full-year earnings to decline 11% to 13% from last year as record-high inflation not only impacts the cost of doing business and margins, but also consumers starting to feel the pinch and start to pull-back spending in certain areas.
Walmart is not rated. The result highlights why we are cautious on consumer discretionary/retail stocks in Australia and New Zealand.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index) was flat again yesterday bracing for a busy week ahead for global markets.
It was a mixed day of trade with heavy losses for tech shares offset by gains for materials, while financials (the ASX’s largest sector) were mostly flat.
EML payment slumped -22%, as it faced challenges in achieving regulatory compliance in Ireland.
Flight Centre rose +3% after guiding it’s full-year loss for the 2022 financial year would be less than expected, which weighed positively across travel stocks. Iron ore miners did most of the heavy lifting helped by a +2.3% rise in iron ore prices.
The New Zealand market (NZX 50 Index, -0.6%) was down on Monday, as global recession fears hit the market.
It was a risk-off tone by the market Heartland Bank was down -3.8% and one of the hardest hit, as well as other growth or economically sensitive stocks trading lower. Summerset rose +2.4% bucking the trend as investors sort after more defensive names.
3 Things Markets will be Watching this Week
- The Fed releases its interest rate decision, and the US announces GDP figures for the second quarter.
- A busy week of US corporate earnings led by tech heavyweights Microsoft, Alphabet (Google), Meta Platforms (Facebook).
- Locally, Australian inflation (CPI) data and AGM’s from Ryman Healthcare, Pacific Edge, Mainfreight and a half year result from Rio Tinto.