Last Updated 4:25PM EST
Nvidia (NVDA), which initially saw a large decline after reporting earnings on Wednesday, finished the day on a very strong note, closing up 5.16%. This came despite what many investors viewed as softer-than-expected second-quarter guidance.
Unfortunately, the same couldn’t be said for Snowflake (SNOW) as it finished the day down 4.63%. Snowflake also reported softer-than-expected second-quarter guidance.
Conversely, Williams-Sonoma (WSM) continued its pre-market momentum into the close, as shares gained almost 13% at the end of the day. Given that the company sells higher-end goods, its higher-income customers have been largely unbothered by higher inflation costs. This resulted in the company reporting strong earnings.
On the opposite side of the spectrum, Dollar Tree (DLTR) and Dollar General (DG) also had very strong earnings. However, unlike Williams-Sonoma, these dollar stores gained lower-income consumers as inflation forces people to look for cheaper alternatives. Dollar General finished up almost 14% while Dollar Tree soared almost 22%.
United States Pending Home Sales Miss Estimates
Last Updated 3:30PM EST
On Thursday, the National Association of Realtors released its United States Pending Home Sales report. This data measures the change in the number of homes under contract to be sold but awaiting to be closed. The month-over-month change was -3.9% compared to the expected change of -2%.
This number on its own does not really mean much. However, combining this with the fact that housing inventory has increased significantly since the Federal Reserve started raising rates does raise some red flags.
If demand was still as strong as it has been in the past, then it would make more sense to see the number of pending sales increase as the number of available homes increases.
However, this is not the case because an argument can be made that the reason why inventory has increased is due to a slowdown in demand. Higher interest rates make it more expensive to own a home, making the already expensive real estate market even more unaffordable despite lower prices.
The real estate sector ETF (XLRE) gave up its gains from earlier on in the day, when it was up a little over 1% before turning slightly negative.
Macy’s is Confident of a Strong Full-Year Performance
Last Updated 12:00PM EST
Macy’s joins the small list of retailers that are going against the trend of reducing full-year forecasts. Many companies have noted that consumer spending patterns have shifted from discretionary items to essential ones as high inflation continues to hit everyday Americans.
However, Macy’s earnings report came in better than expected as it beat on both the top and bottom lines. Revenue for the quarter was $5.35 billion versus expectations of $5.33 billion. In addition, adjusted earnings per share were $1.08 compared to the $0.82 expected from analysts.
The main driver of this strong performance came from high-income customers, who are less impacted by inflation and spent more on higher-priced goods. However, consumers making less than $75,000 also spent more money despite rising prices.
This has given management the confidence to raise its full-year earnings guidance from a range of $4.13 to $4.95 to a range of $4.53 to $4.95 earning per share.
Clearly, investors liked what they heard, as Macy’s share price soared following the report. However, investors probably shouldn’t rush into the stock, as most rallies in 2022 have been short-lived. In addition, it’s worth noting that the share price is approaching a potential resistance point around the $22.50 per share level.
GDP Declined Worse than Expected in Q1
Last Updated 10:05AM EST
On Thursday, the Bureau of Economic Analysis released its second estimate for the first quarter’s gross domestic product (GDP). The updated numbers suggest that GDP fell 1.5% on an annualized basis, which is worse than the initial estimate of a 1.4% decline.
A big driver for this decline was a growing trade deficit as more goods needed to be imported to meet the strong consumer demand. Another driver was the downward revision of private inventory. However, most economists expect to see GDP growth in the second quarter.
On a more positive note, U.S. initial jobless claims came in at 210,000, which was better than the 215,000 expected. The initial jobless claims report measures the number of individuals who filed for unemployment insurance for the first time during the past week.
This was an improvement over the 218,000 from the previous report. It was also a significant improvement from the same period last year that saw 441,000 initial jobless claims.
Stock Market Today: Most Important Economic and Financial Events of Thursday, May 26
Stock futures were slightly up early on Thursday morning as investors processed the latest update from the Federal Reserve, as well as a weak guidance by tech stalwart Nvidia (NVDA).
Futures on the Dow Jones Industrial Average (DJIA) were up 0.63%, while those on the S&P 500 (SPX) inched 0.62% higher, as of 8:10 a.m. EST, Thursday. Meanwhile, the Nasdaq 100 (NDX) futures rose about the flatline by 0.3%.
The movements came after minutes from the Federal Reserve’s May meeting reiterated that the central bank will stick to its 50 basis point rate hikes multiple times this year. The update also mentioned that despite being hopeful of bringing down inflation, the Fed is not denying the possibility of financial instabilities that the rate hikes might bring.
On the other hand, in the stock market, Nvidia shares tumbled more than 6% in the after-hours trading, Wednesday, on a weaker-than-estimated Q2 outlook. The company is also expected to reduce hiring. Moreover, the extended trading session also saw data warehousing firm Snowflake (SNOW) plummet 11.07% on slimmer-than-expected operating margin guidance for Q2.
At the end of the regular market hours Wednesday, the Dow gained 0.6%, while the S&P 500 and Nasdaq 100 advanced 0.95% and 1.48%, respectively. The gains look promising and the indexes are expected to end the week on a positive note, after spending a long time in the red.
Shares of retailer Williams-Sonoma (WSM) climbed 9% after hours on Wednesday, after it reported top and bottom-line beats in Q1.
Investors are awaiting earnings reports from Macy’s (M), Dollar Tree (DLTR), and Dollar General (DG) before the market opens on Thursday. Additionally, update on weekly jobless claims, and updated reading on Q1 GDP, and data on pending home sales are also lined up to be released on Thursday. These will give a better insight to investors about how the inflation is being handled by different sectors in the economy.
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