Morning Minutes

Soft Retail and Tech Guidance Overshadows Earnings Beats




Just a day after an earnings beat by Target sent its shares up 17.75%, several US stocks are selling off in US premarket action despite beating the street on earnings, as forward-looking investors have focused more on signs of softness in corporate guidance instead.

Walmart, for example, is down 6.2% in premarket trading today. The world’s largest retailer beat the street by a penny, but indicated consumer spending was softening (an ominous sign with Black Friday just over a week away), and raised its guidance slightly less than analysts had hoped. In contrast, department store giant Macys is up 7.5% in premarket action after posting a surprise profit ($0.21 vs street -$0.00). Gap reports after the close today.

There also have significant guidance driven moves in the technology sector this morning. Cisco Systems ($1.11 vs street $1.03, down 10.6% premarket) and Palo Alto Networks ($1.38 vs street $1.20, down 5.8% premarket) are down sharply this morning after managements of both companies released weaker than expected guidance based on softening order flow.

The US 10-year treasury note yield has dropped back under 4.50% but for the first time in a while, that doesn’t appear to be helping stocks. Weighed down by guidance related pullback in two of the largest cap companies in the US, the three index futures contracts are down 0.2%-0.4% this morning, giving back most of yesterday’ gains that saw major US indices trade flat to up 0.5%. European markets are mixed with the Dax up 0.4% and the FTSE down 0.6%. Commodity trading is mixed with US Crude Oil down 0.4% and Copper up 0.1%.

In economic news this morning, Canadian housing starts beat market expectations (274K vs street 252K). US weekly initial jobless claims (231K vs street 220K) was worse than expected. The Philadelphia Fed Manufacturing Survey (-5.9 vs street -9) was not as bad as feared, but not as good as yesterday’s positive Empire State Manufacturing Survey either. US industrial production (street -0.3%) is due at 9:15 am EST, followed by the NAHB Housing Market Index (street 40 unchanged) at 10:00 am EST.    

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Colin Cieszynski, Chief Market Strategist

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

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