WMT Warning and Earnings Galore

Stocks opened flat to modestly higher on Monday.  The two large-cap indices then proceeded to roller-coaster sideways until 1:30 pm – 2 pm, when a modest selloff took us to the lows of the day by 3 pm.  Meanwhile, the QQQ sold off the first hour of the day and then roller-coastered sideways at a lower level until 1 pm, when its own selloff took hold taking it to the lows of the day also at 3 pm.  However, a late rally took all 3 major indices up off the lows in a strong rally the last 30 minutes. On the daily chart, this left us with black-bodied candles with wicks on both ends (the longer one to the downside).  The SPY and DIA printed indecisive Doji candles and the QQQ printed a Spinning Top.  However, all 3 major indices do remain above their T-line in a rising short-term trend.

All of this happened on very low volume yet again (with only a dark pool surge taking the DIA barely above average volume.  On the day, SPY gained 0.12%, DIA gained 0.28%, and QQQ lost 0.57%.  The VXX fell a little over 1% to 21.15 and T2122 climbed deeper into the overbought territory at 91.22.  10-year bond yields rose to 2.805% and Oil (WTI) climbed more than 2% to $96.66/barrel.  Despite this roller-coaster action in the indices, 8 of the 10 sectors were in the green, including Energy (which was far-and-away the biggest mover on the day) while Technology and Consumer Cyclicals were moderately lower. 

In business news, after hours WMT warned about its profit forecast.  This warning comes after the retailer cut its prices to get rid of excess inventory.  This news sent shocks throughout the retail industry. WMT stock was down more than 10% in post-market trading.  AMZN was off 4.5% and TGT was down almost 6% on the WMT news.  Discount chains fared slightly better on that news.  BIG, DLTR, DG, BJ, and OLLI were all down 4%, while COST was down 3%.

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In energy news, during the day Russia’s Gazprom said it would further reduce the flow of gas to Europe from 40% of pipeline capacity to 20% of capacity.  Gazprom said they were having equipment problems related to a turbine pump sent to Canada (Siemens) for repair, delayed in return due to sanctions, and now back in Russian hands.  In related news, the IEA says that the US has eclipsed Russia to become the largest exporter of natural gas to Europe as of last month.  Elsewhere, Reuters reports that a drop off in US demand, a glut of oil at trading hubs, and the expected coming exports from China and India (reshipping Russian oil) has refiners under pressure.  The report says that refiners are now looking to reduce production in order to maintain higher profit margins. This comes as we now have had 6.5 consecutive weeks of falling gasoline prices.

After the close, UHS, PKG, CDNS, FFIV, ARE, WIRE, and CADE all reported beats on both the revenue and earnings lines.  Meanwhile, WHR, and RNR both missed on revenue while beating on earnings.  On the other side, NXPI, and SSD both beat on revenue while missing on earnings.  However, KALU missed on both the top and bottom lines.

So far this morning, CNC, UPS, ADM, GE, KO, FISV, GPK, PNR, AAN, and ARCC all reported beats on both the top and bottom lines.  Meanwhile, RTX, MMM, MCD, PHM, PII, XRX, AVNT, TRU, VNTR, and MSCI missed on revenue while beating on earnings.  On the other side, UBS beat on revenue while missing on earnings.  However, GM, MCO, and CEQP missed on both the revenue and earnings lines.  It is worth noting that MMM also announced it will spin off its healthcare unit into a separate publicly trade company.  That transaction is expected to complete at the end of 2023.  In addition, GM cited supply chain problems for their misses and MCD touted price increases (increased margins) as the reason it beat on earnings even while missing on lower sales.

Overnight, Asian markets were mixed.  Hong Kong (+1.67%), Shenzhen (+0.95%), and Shanghai (+0.83%) led the gainers.  Meanwhile, India (-0.898%), Taiwan (-0.87%), and Thailand (-0.46%) paced the losses.  In Europe, we see a similar picture taking shape at mid-day.  The FTSE (+0.56%) points higher while the DAX (-0.92%) and CAC (-0.48%) point lower.  Russia (+1.95%) is the biggest mover in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a down start to the day.  The DIA implies a -0.43% open, the SPY is implying a -0.35% open, and the QQQ implies a -0.45% open at this hour.  10-year bond yields are falling at 2.758% and Oil (WTI) is up 1.8% to $98.48/barrel in early trading.

The major economic news events scheduled for Tuesday include Conf. Board Consumer Confidence and June New Home Sales (both at 10 am), and the 5-year bond auction (1 pm).  The major earnings reports scheduled for the day include MMM, AAN, ACI, ADM, ARCC, AVNT, CNC, KO, GLW, CEQP, ECL, FISV, FELE, GE, GM, GPK, HUBB, IVZ, KMB, MCD, MCO, MSCI, PCAR, PNR, PII, PHM, RTX, ST, TRU, UBS, UPS, WSO, and XRX before the open.  Then after the close, GOOGL, AMP, ASH, AGR, AXTA, AXS, BXP, BYD, CNI, CHX, CMG, CB, CSGP, ENPH, EQR, FE, GOOG, HA, JNPR, MTDR, MSFT, MDLZ, NEX, RUSHA, SKX, TER, TXN, V, and ZION report.

In economic news coming later this week, on Wednesday, June Durable Goods Orders, June Trade Goods Balance, June Retail Inventories, June Pending Home Sales, Crude Oil Inventories, the Fed Interest Rate Decision, Fed Statement, and FOMC Press Conference are announced.  Thursday brings Q2 GDP, and Weekly Initial Jobless Claims.  Finally, Friday we get the June PCE Price Index, Q2 Employment Cost Index, June Personal Spending, Chicago PMI, and Michigan Consumer Sentiment.

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The WMT warning and big-name earnings misses have markets pulling back this morning. However, at least at this point, it looks like the T-line is holding as support and the daily chart continues to look like nothing more than a pullback in the recent week-long uptrend. These factors, plus the earnings calls, are likely to drive the market early today. As we get later in the day, positioning for tomorrow’s Fed announcement (which futures show a very high probability of being a 0.75% hike…but the wording and Q/A count!) and perhaps some waiting on that shoe to drop are likely to be the key factor across stocks, bonds, and even energy commodities. Don’t be surprised if/when we see more intraday whipsaw action. Still, if we look at a longer-term chart, you can see that the downtrend has not been broken (or at least it is not clear it is broken and held) across the major indices. So, be careful taking anything but short-term trades ahead of the data and more importantly market reactions coming later in the week.

Remember that trading is our job. So, do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. So, don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. Always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all our money!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: BBY XRT, SBUX, COST, ETSY, TSLA, DKS, ROST, GES, PLNT, CHWY. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.

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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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