Walmart’s Warning Raises Doubts On Consumer Strength

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In his Daily Market Notes report to investors, Louis Navellier wrote:

Doubts on Consumer Strength

Walmart’s warning raises questions about consumer strength.

Last night, Walmart (NYSE:WMT) surprised investors when they guided down on their quarterly and full-year profit estimates citing rising food inflation resulting in lower sales of general merchandise, particularly apparel. The stock is down 9% this morning and has dragged down retail names in general with the XRT, the S&P Retail ETF, down 3.7% today.

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Slowdown Concerns And Inflation Fears

While there is an argument that in a slowdown, some consumers would trade down to Walmart to save money, evidently, the slowdown in spending by their core customer base is more than the pickup from new shoppers.

This morning, the IMF cut their world economy growth forecast by 0.4 to 3.2% in 2022, and cut 2023 0.7 to 2.9%. The cuts are due to a worse-than-expected slowdown in China and the extended war in Ukraine. The IMF has revised up their inflation estimates to 6.6% this year for advanced economies and 9.5% for emerging and developing markets.

Slowdown concerns are seen in today's US 10-year yield; down 7bps to 2.74% with the 2-year still at 3%. Crude oil is up $1 to just below $98 and natural gas is back to almost $9.

Inflation fears and its impact on spending continues to dominate investor concerns. We will continue to learn more as the week marches on with more earnings and from the Fed.

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