Disappointing retail earrings revealed that the consumer might not be as healthy as all the talking heads suggested triggering a massive wave of selling on Tuesday.  The negative sentiment traveled around the world as thoughts of a worldwide recession grew.  We will now turn our attention to Jobless Claims, Philly Fed MFG Index, and Existing-Home Sales numbers as the national average gas price hit another record high.  Expect another challenging day of price action as margin calls rise and forced redemptions pile on in the days and weeks ahead.

Asian markets traded mostly lower, with Hong Kong falling 2.54% after disappointing results from Tencent.  This morning, European markets trade decidedly bearish as global markets react to inflation and the weakening consumer.  With earnings and economic data ahead, U.S. futures point to a substantial gap as selling extends into Thursday’s open. 

Economic Calendar

Earnings Calendar

We have less than 30 companies listed on the Thursday earnings calendar, with several unconfirmed.  Notable reports include KSS, BJ, AINV, AMAT, RDY, EXP, FLO, MNRO, NNOX, PANW, ROST, VFC & VIPS.

News & Technicals’

Walmart, Target, Home Depot, and Lowe’s reported quarterly results this week, and they each offered a different perspective on where and how people are spending their money.  “While we’ve experienced high levels of inflation in our international markets over the years, U.S. inflation being this high and moving so quickly, both in food and general merchandise, is unusual,” Walmart’s CEO said.  As a result, analysts and investors didn’t anticipate that Walmart and Target would take a massive hit on their profits.  However, Home Depot and Lowe’s have seen more strength among shoppers in recent weeks.  In a tweet to Martin Viecha, Tesla’s senior director of investor relations, Tesla bull Leo Koguan said the company should immediately announce that it plans to buy back $5 billion of Tesla shares this year and $10 billion next year.  Tesla shares closed down more than 6% Wednesday amid a broad market sell-off.  The company’s stock is down more than 30% this year.  When a public company uses cash to buy shares of its own on the open market, a stock buyback is a method that firms use to try to return capital to shareholders.  Cisco missed on the top line in the fiscal third quarter and issued a worse-than-expected revenue forecast for the current quarter.  Analysts at Citigroup said last month that competitors are taking networking switch market share from Cisco.  Tencent, the largest Chinese company listed in Hong Kong by market value, said Wednesday that first-quarter revenue was flat, while profit attributable to shareholders plunged by 23% from a year ago.  Fintech and business services revenue, including WeChat mobile pay, fell quarter-on-quarter for the first time since the initial shock of the pandemic and by nearly as much.  Management also noted recent supportive comments on regulation from Beijing but said implementation would take time.  Treasury yields declined in the early Thursday trading, with the 10-year falling six basis points to 2.83% and the 30-year declining to 3.01%.

All the talking heads keep telling us the consumer was strong, but the disappointing retail earnings reflect consumers changing spending habits due to inflationary pressures.  The data sparked a painful sell-off for traders and investors who bought the recent low, hoping the bottom was finally found.  Unfortunately, the realization that recession is now likely suggests we could have long summer of market declines ahead.  Adding insult to injury, we hit another record high in gas prices, with the national average hitting $4.59 a gallon.  This morning, a new Goldman Sachs report projects the national average could top $6.00 this summer!  Today we face Jobless Claims, Philly Fed Index, and Existing-Home Sales figures with the futures pointing sharply lower with sentiment declining worldwide.  So, buckle up for another hectic day.

Trade Wisely,

Doug