Dow dropped 386, decliners over advancers 3-1 & NAZ declined 126. The MLP index was off 1 to the 272s & the REIT index rose 4+ to 365. Junk bond funds hardly budged & Treasuries were purchased, which lowered yields (still in high territory). Oil slid back to the 78s (a low since early Mar) & gold inched up 1 to 2365.
Dow Jones Industrials
US economic activity continued to expand from early Apr thru mid-May but firms grew more downbeat about the future amid weakening consumer demand while inflation continued to increase at a modest pace, a Federal Reserve survey showed, as central bankers mull how long they will need to keep interest rates at current levels. The central bank's latest temperature check on the health of the economy also showed that the jobs market continues to gradually cool back down toward more normalized levels. The survey, released roughly every 6 weeks, comes as policymakers remain uncertain on when to start a rate-cutting cycle after holding interest rates at 5.25-5.50% for the past 10 months. They are keenly watching trends in activity, jobs & pricing pressures in order to make their decision. "National economic activity continued to expand...however, conditions varied across industries and districts," the Fed said in its survey, known as the "Beige Book," which polled business contacts across the central bank's 12 districts thru May 20. "Overall outlooks grew somewhat more pessimistic amid reports of rising uncertainty and greater downside risk." Waning consumer demand was an ongoing concern for many firms, the Dallas Fed noted, while the continued conflict in the Middle East & further geopolitical tensions across the world were also cited as downside risks. Most Fed districts reported slight or modest growth in economic activity, while 2 noted no change. In particular, retail spending was described as flat to up slightly, echoing recent data that indicated consumers are pulling back on spending. The Fed's benchmark interest rate is set to remain unchanged at the next policy meeting on Jun 11-12 & Fed officials, while all but ruling out another rate hike, have indicated they need consistent encouraging inflation data over a number of months before lowering borrowing costs after being stung by bigger-than expected price increases the first 3 months of the year.
Fed survey: US firms grow more pessimistic on economic outlook
Kohl's (KSS) shares plummeted after the company posted a
surprise loss per share, coming in well below expectations
for a slight profit. The loss was 24¢ per share, compared with a year-ago EPS of 13¢. Net sales decreased 5.3% to $3.18B compared with the year prior, with comparable sales down 4.4%. The
company also lowered its 2024 guidance. It now expects full-year net
sales to decline of 2-4%. Analysts had been expecting its 2024 sales guidance to reflect a 0.2% gain. KSS expects full-year diluted EPS of $1.25 - $1.85, far lower than the $2.34 per share expected. “We recognize we have more work to do in areas of our business,” CEO
Tom Kingsbury said. “We are approaching our financial
outlook for the year more conservatively given the first quarter
underperformance and the ongoing uncertainty in the consumer
environment.” Kingsbury noted positive trends in the women's
category & continued strong growth in the retailer's Sephora
shop-in-shop partnership. KSS announced in Mar that it would add similar in-store outposts of Babies R Us to about 200 locations. “We
continue to have high conviction in our strategy and believe that our
key growth initiatives, including Sephora, home decor, gifting, impulse,
and our upcoming partnership with Babies ‘R’ Us, will contribute more
meaningfully going forward,” he added. The stock tumbled 7.40 to 19.85.
Kohl’s stock plummets 25% after massive earnings miss
Signed sales contracts on existing homes dropped 7.7% in Apr compared with Mar, the slowest pace since Apr 2020, according to the National Association of Realtors (NAR). The pending sales are a forward-looking indicator of closed sales 1-2 months later. Pending sales were 7.4% lower than in Apr of last year & sales were expected to be flat compared with Mar. Because the count is based on signed contracts, it shows how buyers are reacting to mortgage rates in real time. The average rate on the 30-year fixed ended Mar at around 6.9% & then took off, hitting 7.5% by the end of Apr, according to Mortgage News Daily. With home prices still climbing & supply very low, leading to increased competition, that jump in rates had a huge effect on sales. “The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market,” said Lawrence Yun, chief economist for the NAR. “But the Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.” Sales were down in every region of the country, but they fell hardest in the Midwest & West. The former has some of the most affordable markets in the nation & the latter has some of the most expensive. “The prospect of measurable home price declines appears minimal. The few markets experiencing price declines will be viewed as second-chance opportunities for buyers to enter the market if those regions continue to add jobs,” Yun added. Perhaps in reaction to the slow sales pace in Apr, the share of sellers cutting prices in May hit 6.4%, the highest level since 2022, according to a new report from Redfin. The median asking price also dropped for the first time in 6 months. Active inventory in Apr was 30% higher than in Apr 2023, according to Realtor.com, which suggests the summer market could be more active than last year. “Though inventory and prices are moving in a more buyer-friendly direction, lower mortgage rates will be crucial in bringing both buyers and sellers back into the market,” said Hannah Jones, senior economic research analyst with Realtor.com.
Stocks have lost steam amid renewed gloom about the odds for rate cuts. Earnings are coming in sluggish at best & anxiety over high interest rates are keeping investors on the sidelines.
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