Thursday, May 16, 2019

Markets rise on positive earnings from Walmart and Cisco

Dow shot up 229, advancers ahead of decliners about 4-1 & NAZ gained 101.  The MLP index added 2+ to the 255s & the REIT index added 2 to 385 to another record.  Junk bond funds inched higher & Treasuries declined in price.  Oil rose 1+ to the 63s & gold fell 6  to 1291 while stocks were being purchased.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil62.93

GC=FGold   1,291.10
 -6.70 -0.5%

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Walmart (WMT), a Dow stock & Dividend Aristocrat, topped profit estimates for Q1 as same-store sales grew at a pace not seen in nearly a decade & the retail giant's e-commerce business continued to expand at a double-digit percentage rate.  "We have a stronger foundation in place with our stores, and we're making good progress in eCommerce. We're embracing new processes and technologies with the goal of serving our customers even better," CEO Doug McMillon said.  Overall, revenue was $123.9B, less than expected & EPS grew to $1.13, higher than the $1.02 predicted.  E-commerce sales at the world's largest retailer grew 37%, a decline from the holiday time period but a year-over-year increase.  Same-store sales rose 3.4%, its best quarterly growth in 9 years.  Inventory in the US grew 5.9%, an increase that could cause alarm among some analysts & one that the company attributed to "accelerated buying" in seasonal merchandise.  "We feel good about the quality of the inventory position and expect quantities to normalize as the year progresses," CFO Bregg Biggs said.  One potential headwind is Pres Trump's decision to raise existing tariffs on $200B in Chinese goods from 10% to 25%.  The company is "going to continue to do everything we can to keep prices low," according to Biggs, including driving efficiency & reducing costs in the supply chain.  WMT returned $3.7B in Q1 thru divs & share buybacks.  The retailer launched a $15B repurchase program in 2017.  The stock rose 3.17.
If you would like to learn more about WMT, click on this link:

Walmart 1Q profits top estimates as e-commerce operations continue to grow

As trade tensions with the US intensified, China sold off its Treasury holdings at the fastest pace in about 2 years during Mar.  The largest foreign owner of US debt reduced the level by just shy of $20.5B, a slight decrease that brought the total holdings down to $1.12T.  But the move represents a continued pattern of declines that comes as the 2 sides have been unable to hammer out a long-term trade agreement & instead have been engaging in a tit-for-tat tariff fight that has escalated in recent days.  In the 12-month period ending Mar, the latest month for which data is available, China's stockpile of US gov notes, bonds & bills fell $67.2B, a 5.6% decline.  The threat of the nation either not buying Treasuries or engaging in outright sales has shaken the bond market before.  In addition to any punitive action China might take, it is thought to have reduced its holdings in an effort to defend its currency.  More aggressive actions to cut holdings is considered a nuclear option that could further aggravate ongoing trade negotiations.  The impact, though, of any such moves is unclear.  China’s share of total US debt compared to other global gov declined to 17.3%, the lowest since 2006.  Japan is still the 2nd-largest holder, with $1.08T, while the UK stepped backed into 3rd place as it increased its level to $317.1B.  Foreign gov ownership of US debt hit a fresh record of $6.47T, up 4% from a year ago, as the gov's total debt continues to swell & now has topped $22T.  Foreign residents increased their holdings by $23.9B.

China has cut its holdings of US debt to the lowest level in two years amid trade tensions

Cisco (CSCO), another Dow stock, rose after the company reported better-than-expected earnings for the fiscal Q3-2019 fiscal year, which ended on Apr 27 & strong revenue guidance.  EPS was 78¢, excluding certain items, vs 77¢ expected & revenue was $12.96B slightly above the $12.89B expected.  Revenue was up 4% year over year.  The  company expects 4.5-6.5% revenue growth in its fiscal Q3 & EPS of 80-82¢.  Analysts were looking for $13.29B in revenue,3.5% revenue growth, & EPS of 81¢.  CEO Chuck Robbins addressed the subject of how tariffs could affect business.  “We see very minimal impact this point based on all the great work the teams have done, and it is absolutely baked into our guide going forward,” Robbins said.  The majority of iys business comes from selling networking software & hardware, including switches & routers that are kept inside corporate data centers.  This market is represented in CSCO's Infrastructure Platforms business segment, which contributed $7.55B in revenue, beating the $7.46B consensus estimate.  The company’s Applications business segment, which includes AppDynamics & conferencing products, generated $1.43B in revenue, lower than the $1.50B estimate.  The Security business segment, featuring among things the recently acquired Duo Security, had revenue of $707M, up 21% & above the estimate of $676M . The stock  went up 3.19.
If you would like to learn more about CSCO, click on this link:

Cisco rises on strong revenue guidance

Stocks were bid higher at the opening & investors continued buying stocks.  Earnings were encouraging, but more retailers will be reporting & their reports may not bring out stock buyers.  REITs continue to do well, although the gains are modest when compared with traditional companies.  With today's rise, the Dow is back to where it was one week ago.

Dow Jones Industrials

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