Morning Minutes

Mixed Earnings Drag On Stocks, Energy Prices Rise Again




Coming off of a mixed Monday that saw the Dow finish up 0.3% and the NASDAQ finish down 0.4%, US markets have turned decisively downward this morning with the three main index futures contracts down 0.4%-0.5%. Walmart, one of the country’s largest retailers, is down 9.1% in premarket action and appears to be dragging the retail sector in particular, and the broader market in general, down with it after putting out a profit warning. Blaming consumers having to cut discretionary purchases with staples like food and gasoline eating up more of household budgets, Walmart forecast a sales decline of 8-9% from a year ago for the quarter ending this month, down from previous expectations of a flat quarter.  

Meanwhile, growing worries about whether Europe will be able to source enough natural gas supply to get through next winter has increasingly been impacting sentiment in European and also in energy markets. Natural gas is soaring again today, up 8.9%, while WTI crude oil is up 1.8%. Continental bourses are down, led by declines of 0.7%-0.8% for Germany and Italy, while London is up 0.5%. European currencies are also taking a hit with the Euro falling 0.9% against the US Dollar, while the Pound is down 0.5%. In another sign of investor caution, cryptocurrencies are getting hammered again today with Bitcoin down 2.9% and Ethereum down 5.6%.

It’s a big day for earnings reports from the US. Some companies were able to beat expectations including McDonalds, Coca-Cola, 3M, and General Electric. On the other hand, results from General Motors (who noted it is getting ready for a recession) and Whirlpool fell short of expectations. Several companies mentioned rising costs, with varying degrees of success in passing them along to consumers. After the close today, Microsoft, Alphabet and Visa are reporting results in the US, plus Canadian National Railway and First Quantum Minerals kick off earnings season in Canada.

A two-day Fed meeting starts today with the US central bank expected to announce a 0.75% interest rate increase to 2.50% tomorrow afternoon. With more signs of the economy slowing, the US 10-year treasury note yield has been drifting downward, recently trading near 2.75%. Today, house price and new home sales data is due for the US with durable goods orders due tomorrow morning.

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Colin Cieszynski, Chief Market Strategist

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

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