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Stocks Stumble as Target’s Plunge Weighs on Retailer Stocks

Barchart - Wed May 18, 2022

Morning Markets

June S&P 500 futures (ESM22) this morning fell back from a 1-week high and are down -0.77%.   Weakness in retailer stocks is weighing on the overall market today.  Target sank more than -20% in pre-market trading after cutting its full-year operating margin rate, and TJX Cos fell more than -6% after reporting disappointing Q1 net sales.  Stock indexes maintained moderate losses this morning on weak U.S. housing starts data.

Stocks have carry-over pressure from Tuesday’s comments from Fed Chair Powell who said the Fed “won’t hesitate” to tighten policy beyond neutral to curb inflation and that it will continue to raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. 

U.S. Apr housing starts fell -0.2% m/m to 1.724 million, weaker than expectations of 1.756 million. Apr building permits, a proxy for future construction, fell -3.2% m/m to a 5-month low of 1.819 million, still above expectations of 1.814 million.

The Euro Stoxx 50 index this morning fell back from a 1-1/2 week high and is down -0.32%.  European stocks fell back today on weak economic data and hawkish ECB comments.  Automakers declined today after Eurozone Apr new car registrations fell for the tenth straight month.  Also, the 10-year German bund yield rose to a 1-week high today of 1.093% after ECB Governing Council member Rehn said the ECB should raise interest rates "relatively quickly."

Eurozone Apr CPI was revised downward by -0.1 to a record high 7.4% y/y from the initially reported 7.5% y/y.

Eurozone Apr new car registrations fell -20.6% y/y, the tenth consecutive month that registrations have fallen.

ECB Governing Council member Rehn said there's broad agreement among the ECB Governing Council that policy rates should exit negative territory "relatively quickly." 

Asian markets today settled mixed.  China’s Shanghai Composite Index closed down -0.25% and Japan’s Nikkei Stock Index closed up +0.94%.  China’s Shanghai Composite Index fell back from a 1-1/2 week high and fell moderately as losses in property stocks weighed on the overall market after data showed the decline in China’s new home prices accelerated in April. Stock prices were also underwhelmed by a lack of details from Chinese Vice Premier Liu He, who said the government would support the development of digital-economy companies. 

China Apr new home prices fell -0.3% m/m and -0.1% y/y.

Japan’s Nikkei Stock Index climbed to a 1-1/2 week high and closed moderately higher after Tuesday’s strong U.S. economic data eased concerns about a slowdown.  Japanese stocks also rallied after today’s data showed the Japanese economy contracted less than expected in Q1.

Japan Q1 GDP fell -1.0% (q/q annualized), stronger than expectations of -1.7%.  The Q1 GDP deflator fell -0.4% y/y, stronger than expectations of -1.0% y/y.

Pre-Market U.S. Stock Movers

Target (TGT) plunged more than -20% in pre-market trading after reporting Q1 adjusted EPS of $2.19, well below the consensus of $3.06, and cut its full-year operating margin rate to about 6% from a prior estimate of 8% or higher. 

Lowe’s (LOW) dropped -2% in pre-market trading after reporting Q1 comparable same-store sales fell -4.0%, a bigger decline than expectations of -3.25%. 

TJX Cos (TJX) dropped more than -6% in pre-market trading after reporting Q1 net sales of $11.4 billion, below the consensus of $11.6 billion, and forecasting Q2 EPS of 65-69 cents, weaker than the consensus of 75 cents.

Tesla (TSLA) fell more than -1% in pre-market trading after Piper Sandler cut its price target on the stock to $1,035 from $1,260 to reflect Covid-related weakness in China.

Doximity (DOCS) sank -18% in pre-market trading after forecasting Q1 revenue of $88.6 million-$89.6 million, well below the consensus of $96.7 million.

Penn National Gaming (PENN) climbed more than +4% in pre-market trading after Jeffries raised its recommendation on the stock to buy from hold. 

Monster Beverage (MNST) rose +1% in pre-market trading after Bernstein raised its recommendation for the stock to outperform from market perform. 

Analog Devices (ADI) gained +2% in pre-market trading after reporting Q2 revenue of $2.97 billion, better than the consensus of $2.84 billion. 

Container Store Group (TCS) jumped more than +7% in pre-market trading after reporting Q4 net sales of $305.5 million, above the consensus of $279.8 million, and forecasting full-year net sales of about $1.13 billion, better than the consensus of $1.09 billion. 

Today’s U.S. Earnings Reports (5/18/2022)

Analog Devices Inc (ADI), Bath & Body Works Inc (BBWI), Cisco Systems Inc (CSCO), Copart Inc (CPRT), 

Lowe's Cos Inc (LOW), Synopsys Inc (SNPS), Target Corp (TGT), TJX Cos Inc/The (TJX).

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.