Morning Minutes 5/20/2020

Morning Minutes

Oil Inventories and US Retailer Earnings In Focus

May 20, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

The price of crude oil is climbing again this morning with WTI up 2.3% trading near $32.50/bbl and Brent crude up 2.5%, trading near $35.50/bbl. Last night API reported a 4.8 mmbbl drop in its US weekly oil inventories, the first decline since the week of March 20. DOE weekly US oil inventories are due at 10:30 am EDT today with the street expecting a 1.1 mmbbl increase following a 0.75 mmbbl decrease.

US index futures are up 1.2%-1.5% this morning, shrugging off yesterday’s declines for US indices which varied between 0.6% for the NASDAQ and 1.6% for the Dow. Dow futures are currently up about 315 points.

Earnings reports from US retailers are mixed again this morning with weakness in discretionary products offset by growth in discount, online, staples and home improvement retailing. Highlights include:

Lowes reported scorching same store sales growth (11.2% vs street 3.3%) which helped to boost EPS above expectations ($1.77 vs street $1.32).

Target* reported same store sales growth of 10.8%, above the 7.5% street estimate, and EPS of $0.59 which came in above the $0.40 investors were expecting. Online sales increased by 141%, but management also noted that its costs have increased between more spending on store cleaning, online order shipping, and higher wages for employees.

Urban Outfitters, on the other hand, saw its same store sales plunge 28% and management indicated same store sales could be down 60% in the current quarter. The company posted a loss per share of $1.41, which was worse than the $0.29 loss investors were expecting.

*Shares of Target are held in some portfolios managed by SIA Wealth Management.


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