Earnings over 1.5% on the Wall with retailers at the reins

With retailers continuing to impress despite their brutal inflation, the US market is laying the groundwork for its second consecutive significant profit session.

In particular, the industrial index Dow Jones moves upwards 1.4% or 450 units and trades on 32,570 unitsthe enlarged S&P 500 is rising 1.54% moving on 4,040 unitsas well as the technologically weighted Nasdaq strengthened by 1.88% at 11,646 units.

The market has already shown some confidence since yesterday after the publication of the minutes of the May meeting of the Fed, in which the bank officials appeared determined to act drastically in order to tame the unbridled inflation.

As the minutes showed, the Fed officials confirmed their intention to raise interest rates by 50 bp. in the next two meetings as expected, but left open the margin for further corresponding moves in the meetings that will follow if deemed necessary.

It is noted that the markets are currently pricing that the Fed will move to an interest rate around 2.5% -2.75% by the end of the year, something that many central bankers characterize as neutral. However, the statements in the minutes showed that the committee is ready to go beyond this level.

Thus, the indicators that moved cautiously upwards for most of yesterday’s session picked up rhythms after the minutes, finishing close to the highs of the day.

In any case, at this stage, the Dow Jones is running a negative series of 8 falling weeks, while the S&P 500 and Nasdaq have completed 7 falling five days.

And the worries about the course of the market remain. As 22V Research’s Dennis DeBusschere said in a note today, “the recent daily rallies have been followed by aggressive sales the next day, so it will be positive in the short term for international markets to hold up today.”

He also stressed that “investors anticipate that the tightening of financial conditions in the last 6 months is enough to significantly slow down economic growth. This is confirmed by the narrowing of the range of US financial data.”

As it became known today, the country’s GDP shrank by 1.5% in the period January – March, compared to the initial announcement of a fall of 1.4%.

In the individual figures, pre-tax corporate profits fell 2.3% from the previous quarter, although a year earlier they had risen 12.5%. According to Bloomberg, 2021 was the most profitable year for American companies since 1950, but now there is the first decline in corporate profits in the last five quarters.

On the other hand, of course, the news from the consumer spending front was positive, as the revised measurement showed an increase of 3.1% in the first quarter from 2.7% previously.

This is confirmed by the strong financial results announced daily by retailers, whose securities are rallying today with an extra boost from the upward revision of consumer spending.

In particular, Macy’s is up 15% after upgrading its outlook for the year and Williams-Sonoma is closely following with + 13% having surpassed market estimates for its quarter.

Similarly, discount retailers Dollar Tree and Dollar General are jumping 18% and 14% respectively, after both also exceeded the estimates in the sizes announced today.

The frantic pace of retailers in the market is dragging even Nvidia, which is growing by about 1%, although today it issued a weaker-than-expected guidance for its second quarter.

On the other hand, Snowflake did not manage to escape the sellers after the disappointing operating profit margin announced today and sinks above 11%.

Meanwhile, the Twitter title jumps 5% after Elon Musk increased his stake in the offer he has made to buy the social media giant to 33.5 billion dollars, indicating according to analysts the seriousness of his intentions. .

Microchip maker Broadcom has announced plans to buy cloud company VMware in a $ 61 billion deal that, if completed, would mean one of the biggest deals of all time in the tech industry, with the former stock up 2.4 percent. % and the second by 1.1%.

Finally, the labor market continues to confirm the strong period it is going through, as the initial applications for unemployment benefits fell at a rate that exceeded analysts’ estimates last week.

In particular, applications fell by 8,000 to 210,000, while the average estimates of analysts in a Bloomberg survey expected a smaller drop to 215,000.