Wall Street nearly recouped overnight losses and was inching toward gains yesterday after some bell-weather retailers reported strong second-quarter earnings, suggesting that Americans have continued to spend despite the worst inflation in 40 years.
Futures for the Dow and S&P each fell less than 1% in premarket trading.
Retail giants Walmart and Home Depot, whose quarterly financial results often give investors insight into broader consumer habits, both reported strong second quarter earnings, giving markets a boost before the opening bell.
Walmart earned $5.15 billion, or $1.77 adjusted for one-time costs and charges, easily topping Wall Street’s target of $1.62 per shares. Sales also beat analysts projections and shares rose more than 4% before the opening bell.
Home Depot reported record quarterly profit and revenue, but shares dipped less than 1% as the home improvement retailer maintained its guidance for the year.
Stocks in July had their best month in a year-and-a-half, but some analysts say prices haven’t properly reflected real risks.
“It doesn’t seem to matter what the news is, there is just a huge appetite to buy stocks. And to keep buying,” said Clifford Bennett, chief economist at ACY Securities. “Talk of the bottom having already been priced in seems somewhat premature. Should the market turn down again after all this long positioning, it will fall with a thunderous impact. Buyers beware.”
Shares in Europe rose and Asian markets were mixed a day after China reported negative economic data and analysts warned that volatility may lie ahead.
Japan’s benchmark Nikkei 225 was little changed and finished at 28,868.91. South Korea’s Kospi rose 0.2% to 2,533.52. Australia’s S&P/ASX 200 added 0.6% to 7,105.40. Hong Kong’s Hang Seng reversed course and was down 1.1% at 19,830.52, while the Shanghai Composite gained nearly 0.1% to 3,277.88.
Markets reacted to news that China’s central bank cut a key interest rate, acknowledging more needed to be done to shore up its economy. The move is the latest warning for markets already on edge over record-high inflation and fears about recessions in the U.S. and elsewhere.
China is the world’s second-largest consumer of crude oil, so the news weighed on energy prices on Monday, but were back up slightly yesterday. U.S. crude gained 74 cents to $90.15 a barrel. Brent crude, the international standard, picked up 43 cents to $95.53.
Global investors are worried that the U.S. Federal Reserve could hit the brakes too hard and send the economy into a recession. Any signal that inflation could be peaking or retreating has helped ease some of those worries.
“Lack of direction is what investors will be suffering until we see clearer signs of inflation abating. And that will take time, as we must see a couple of encouraging data points to call the central banks’ inflation fight successful. The lack of clear direction is driving the markets up and down,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Investors are also keeping a close watch on how inflation is affecting businesses and consumers. Spending has slowed and the broader economy has already contracted for two straight quarters.
Following Walmart and Home Depot, Target reports results on Wednesday. The U.S. Commerce Department also releases its July retail sales report on Wednesday. Economists surveyed by FactSet expect modest 0.2% growth from June, when sales rose 1%.
In currency trading, the U.S. dollar edged up to 134.39 Japanese yen from 133.27 yen. The euro cost $1.0130, down from $1.0165. MDT/AP
