In his Daily Market Notes report to investors, Louis Navellier wrote:
Struggling Retailers
Retail sales are holding up, while Fed uncertainty pushes bonds and stocks lower.
Headline retail sales for April came in below the forecast but was the first m-o-m increase since January. Excluding autos, the number hit the forecast and was also the first positive data since January. Excluding auto and gasoline, it was noticeably higher than forecast, though well below the strong January number.
The consumer is still spending and absorbing higher prices though big ticket items are weak having been pulled forward during the pandemic, credit card balances are high despite record interest rates charged, and the wealth effect of higher home prices and 401K results is waning.
The impact of slow home sales, as no one wants to give up their 3% mortgages, was seen as Home Depot (NYSE:HD) posted its worst revenue miss in 20 years and lowered its fiscal year sales forecast from flat to down 2%-5%. They noted lower lumber prices and colder weather didn’t help. The stock is down 1.5% this morning and down 10% YTD. The results have taken down other home-related retailers.
A lot of retailers are having a tough year: Gap (NYSE:GPS) -29%, Macy’s (NYSE:M) -25% Dollar General (NYSE:DG) -11%, Best Buy (NYSE:BBY) -9% and Nordstrom (NYSE:JWN) -7%. Tomorrow, we get Target (NYSE:TGT) and Thursday morning Walmart (NYSE:WMT) which will give more insight into consumer spending trends.
Crowded Tech
Tech continues to show strength, with the NASDAQ the least impacted major index this morning and the QQQ in the green.
The 2-year US Treasury rate is back up to 4.07%, near the high for the month and the 10-year is also at a month high at 3.55%. The debt ceiling continues to be an increasing concern as Yellen points out the yield differential of debt maturing before and after the June 1st projected date of hitting the wall.
In another sign of the times, seven companies with at least $50M in liabilities have filed for bankruptcy in the last 48 hours, the most since at least 2008 in that short time frame and seems as a reflection of tighter lending.
Today, a Bank of America survey showed 65% of fund managers are now expecting a weaker economy, the most bearish report YTD, though the same amount saw a soft landing as well, and importantly only a small contraction in earnings.
It also showed the highest allocation to stocks of the year, and the bond allocation the highest since 2009. Tech has seen the biggest 2-month increase allocation since the Great Recession as a flight to quality, and big tech as the most crowded trade.
Find Rational Valuations
The data from China continues to be disappointing and the war in Ukraine seems to be heating up rather than slowing down. With all these bricks adding to the wall of worry, stocks are doing remarkably well.
While the mega tech multiples are high (Apple 29X, Microsoft 33X, Alphabet 26X, Amazon 265X, NVIDIA 165X), it would seem that many other good companies with more rational valuations have decent upside potential once these major issues get resolved.
Coffee Beans: Under the Sea
Joseph Dituri, an associate professor at the University of South Florida, broke the world record for living underwater on Saturday when he marked 74 days at Jules’ Undersea Lodge in Key Largo.
His mission of studying the physiological and psychological effects of compression on the human body continues until June 9 for a total of 100 days underwater. Source: UPI. See the full story here.
