Dow sank 238, decliners over advancers 3-1 & NAZ was up 17. The MLP index pulled back 1+ to the 222s after yesterday's rise & the REIT index was off 6+ to 361. Junk bond funds were little changed & Treasuries saw more selling which raised yields. Oil slid below 71 & & gold retreated 16 to 2006.
AMJ (Alerian MLP Index tracking fund)
Home Depot (HD), a Dow stock, reported its biggest revenue miss in more than 20 years & lowered
its forecast for this year, as consumers delay large projects & buy
fewer big-ticket items like patio sets & grills. It said cold weather & falling lumber prices also
hurt fiscal Q1 sales. Its last quarterly miss of this
magnitude was in 2002. HD now expects sales & comparable sales to decline 2-5% for the fiscal year. It had previously predicted roughly flat
sales for the period. Operating margin rate is also expected to
come in lower for the year, at 14-14.3% compared
with a previously expected 14.5%, including the effect of a $1B investment in employee wages. CFO Richard McPhail said that HD anticipated
2023 would be a year of moderation, after Americans' huge appetite for
home improvement during the Covid pandemic. Its annual sales have grown by about $47B from 3 years ago. Yet he said the expected pullback has been compounded by rising mortgage rates & a shift toward spending on services. “The
state of the homeowner is that they’re very healthy,” he said. “They
have healthy balance sheets. They have healthy incomes. But I do think —
and our professional customers tell us they hear this from their
customers — there is that shift, even if it’s temporary from larger
projects into smaller ones.” EPS was $3.82, down 8.5% from $4.09 a
year earlier. Revenue fell 4.2% to $37.2B from $38.9B. Comparable sales for Q1 fell 4.5% & dropped 4.6% in
the US. McPhail said lumber deflation accounted for more than 2
percentage points of that decrease. Sales trends were better among
do-it-yourself customers than among home professionals, but sales fell
year-over-year for both groups, CEO Ted Decker said. “Once we’re through this period, we think the medium to long-term fundamentals of home improvement are strong,” he added. The stock fell 4.01.
If you would like to learn more about HD, click on this link:
club.ino.com/trend/analysis/stock/HD_aid=CD3289&a_bid=6aeoso5b6f7
Treasury Secretary Janet Yellen reaffirmed to Congress that the US could default on its debt as early as Jun 1. “With additional information now available, I am writing to note that we still estimate that Treasury will likely no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” she wrote. The guidance came as the White House & congressional leaders prepared to meet tomorrow to continue negotiations over potential spending cuts in exchange for House passage of a debt ceiling hike. The Dem-majority Senate is expected to back whatever the White House negotiates with the GOP-controlled House. In recent days, conflicting reports have emerged about whether negotiators are making progress. Pres Biden sounded optimistic this past weekend about reaching a deal with Reps to raise or suspend the debt limit in time to avoid economic fallout from even a potential US debt default. “I really think there’s a desire on their part, as well as ours, to reach an agreement, and I think we’ll be able to do it,” Biden told reporters in Delaware. He added, “I remain optimistic because I’m a congenital optimist.” But that optimism wasn't matched on the other side of the table. “I still think we’re far apart,” McCarthy said outside the Capitol. “It doesn’t seem to me yet that they want a deal.” As she has in prior letters to Congress, the Treasury secretary underscored the urgency of the situation. “Waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” Yellen wrote. “In fact, we have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” The new letter also came just days after guidance from the Congressional Budget Office that said tax revenues & emergency measures after Jun 15 “will probably allow the government to continue financing operations through at least the end of July.” “If the debt limit remains unchanged, there is significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations,” said the CBO report.
Treasury Secretary Yellen reaffirms U.S. could run out of money to pay bills by early June
Americans picked up their spending at retail stores in Apr as inflation showed welcome signs of slowing down. Retail sales,
a measure of how much consumers spent on a number of everyday goods,
including cars, food & gasoline, rose 0.4% in Apr, the Commerce
Dept reported. It marks the first increase in 2 months,
although it is below the 0.8% increase projected. Excluding the more volatile measurements of gasoline & autos, sales climbed 0.6% last month. The figures are not adjusted for inflation. Consumers spent
less on big-ticket items like cars, electronics, appliances, furniture & clothing & more at bars & restaurants. Gas sales slid 0.8% in
Apr, even as the cost of fuel spiked. "Americans
spent at an overall steady-as-she-goes pace in April, with the mix
continuing to fall away from items such as electronics and furniture to
spending at bars and restaurants," said Robert Frick, corp
economist with Navy Federal Credit Union. "These trends make sense
because of the spending binge on goods during the COVID-19 years had to
slow sometime, while we’re still playing catch-up on socializing with
family and friends." Despite the rebound in spending last month, sales rose in just 7
of 13 retail categories last month, including motor vehicles & parts
dealers, garden & home improvement stores, health & personal care
stores & general merchandise stores. A solid job market & big
wage increases have helped to buoy consumer spending. However, consumers
are still spending more frugally as inflation remains abnormally high & rising interest rates begin to take a toll on borrowing costs.
Retail sales rise in April for first time in 2 months
Janet has put out numerous warnings about the debt ceiling crisis, but Biden can't be bothered. That attitude is scary for the stock market. HD's report is adding to the recession fears everybody is worrying about. Meanwhile retail sales (2/3 of the economy) are sluggish.
Dow Jones Industrials
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