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Daily Market Report | August 16, 2022


Stocks Mixed With Retail Earnings in Focus – Wall Street Journal, 8/16/2022

  • U.S. stock indexes were mixed Tuesday morning as investors parsed earnings from major retailers that showed consumers are still shopping despite higher inflation.
  • The S&P 500 was up 0.1%, reversing earlier losses. The Nasdaq Composite fell throughout early morning trading to 0.3%, indicating muted declines for technology stocks, and the Dow Jones Industrial Average was up 0.6%.
  • Stocks have largely rallied in recent days, with the S&P 500 climbing for four straight weeks as of last Friday. Weak data on China’s economy and U.S. manufacturing are weighing on sentiment, spurring concerns that the momentum may be fading, investors said.
  • The retailers’ earnings reports are being scrutinized for signals about how rising prices are affecting consumer spending. Walmart and Home Depot reported on Tuesday and Target and others are scheduled for later in the week.
  • Shares of Walmart climbed 5.6% after the big-box retailer reported earnings that beat estimates and raised its outlook for the fiscal year, less than a month after it had issued a profit warning. Its CEO said the company had been able to cut costs in its supply chains.
  • Home Depot rose 3.9% after the retailer posted record quarterly sales and earnings that beat Wall Street’s estimates but also said customer transactions had declined.
  • Oil prices edged lower, with global crude benchmark Brent down 1.8% to trade at $93.47 a barrel.
  • The yield on the benchmark 10-year Treasury note was at 2.843%, up from 2.790% Monday, while the two-year yield reached 3.220%.
  • Overseas, the pan-continental Stoxx Europe 600 added 0.1%. In Asia, major benchmarks were mixed with the Shanghai Composite Index closing little changed and Hong Kong’s Hang Seng Index declining about 1%.

Walmart Revenue Rises as Higher Prices Lift Business – Wall Street Journal, 8/16/2022

  • Walmart’s revenue rose in the second quarter as the retail giant benefited from consumers both paying more for goods and stepping up shopping trips to its stores.
  • Revenue rose 8.4% to $152.86 billion.
  • Walmart’s U.S. comparable sales, those from stores and digital channels operating for at least 12 months, rose 6.5% in the quarter ended July 29, helped by higher prices, market-share gains in grocery and strong sales of private-label products.
  • On Tuesday, Walmart said its unit sales of food were slightly negative for the quarter. Grocery-sales volume industrywide fell 2.5% in those four weeks, according to data from market-research firm IRI.
  • Operating income in the latest quarter dipped 6.8% as higher discounts and selling more low-margin grocery items cut into margins.
  • Overall, Walmart said its net income in the three months ended in July was $5.15 billion, compared with $4.28 billion a year earlier. On a per-share basis excluding one-time items, the profit was $1.77, compared with the $1.62 a share expected from analysts, according to a FactSet poll.

Home Depot Posts Higher Sales as Transactions Continue to Drop – Wall Street Journal, 8/16/2022

  • Home Depot’s second-quarter sales rose 6.5% as higher average spending per shopping trip more than offset another drop in transactions.
  • Second-quarter sales came in at $43.79 billion, ahead of Wall Street expectations of $43.36 billion, according to FactSet.
  • Same-store sales, which adjusts for store openings and closings, were up 5.8%, including 5.4% in the U.S.
  • The home-improvement chain said Tuesday that the average amount spent per transaction rose 9.1% during its second quarter, while the total number of transactions fell 3%.
  • For the three months ended July 31, Home Depot posted earnings of $5.17 billion, or $5.05 a share, compared with $4.81 billion, or $4.53 a share, in the same quarter last year.
  • Wall Street analysts had expected earnings of $4.95 a share.

Flush With Oil Profits, Saudi Arabia Pours $7.5 Billion Into U.S. Stocks From Amazon to Microsoft – Wall Street Journal, 8/16/2022

  • Saudi Arabia’s sovereign-wealth fund has invested $7.5 billion in blue-chip American companies from to JPMorgan Chase, as the kingdom deploys windfall revenue from high oil prices to diversify its investments.  The Public Investment Fund took on minority stakes across 17 companies, including Google parent Alphabet, BlackRock and Microsoft, in the three months ended June 30, according to U.S. securities filings. Each investment was worth $400 million to $500 million, the filings show.
  • Despite the purchases, the overall holdings of U.S.-listed securities in the $600 billion fund fell $3 billion in the quarter to $40.8 billion after other companies in its portfolio were routed by this year’s fall in share prices.

Money Pours Into Funds Targeting Solar Power, Cell Towers and Data Centers – Wall Street Journal, 8/16/2022

  • Investment companies such as KKR and Brookfield Asset Management are raising money at a record clip to invest in power plants, telecom towers, and data centers—businesses that can thrive even as inflation runs rampant.
  • Infrastructure funds have raised about $130 billion this year, already outpacing the record of $125 billion set last year, according to Preqin, a data provider.
  • Contributing to that total were a $17 billion fund raised by KKR, a $15 billion equivalent from Brookfield and a $14 billion fund from Stonepeak Partners LP.
  • The International Energy Agency estimates that annual investments in energy infrastructure and technology need to increase from more than $1 trillion to more than $4 trillion by 2030 to achieve net-zero emissions by 2050.

Oil Fluctuates as Market Mulls Iran Supply, Weak Economies – Bloomberg, 8/16/2022

  • Oil prices flipped between gains and losses as the market weighed expectations of an increase in Iranian production with worsening prospects for global growth.
  • West Texas Intermediate traded near $89 a barrel in another volatile summer session marked by low participation. Talks between Iran and European Union negotiators indicated progress toward a renewed nuclear deal.
  • WTI had fallen to a six month low on Monday on bearish US data, including a rapidly cooling manufacturing sector. That followed weaker-than-expected Chinese numbers.
  • The signs of moderating demand come as prompt and futures spreads signal concerns over tight global markets are easing.

Reebok Owner Authentic Brands to Buy British Fashion Label Ted Baker – Wall Street Journal, 8/16/2022

  • Authentic Brands Group LLC said it has agreed to buy Ted Baker for the equivalent of $254 million, adding the struggling British fashion label to its stable of brands that include Brooks Brothers and Reebok.
  • The New York-based company said Tuesday there were “significant growth opportunities for the Ted Baker brand in North America” in particular, and that taking the business private would enable a restructuring that would “maximize its future potential.”
  • Authentic Brands has made a name for itself in recent years by buying up downtrodden brands, which it then typically licenses to retail operators.
  • Last year it bought sneaker maker Reebok from Adidas, and in 2020 acquired bankrupt fashion retailer Forever 21.

Disneyland Restarts Annual Pass Program With Top Tier at $1,599 – Bloomberg, 8/16/2022

  • Walt Disney’s Disneyland resort in California is restarting annual pass sales, with extra perks for customers willing to pay the hefty fees.
  • Existing pass holders will be given the option to renew on Thursday at prices that reach as high as $1,599 for the new Inspire pass.
  • It includes free parking and a 20% discount on some merchandise at the parks, but comes with a few days around the December holidays when the pass can’t be used. It replaces a pass called the Dream Key which cost $1,399.
  • Three other pass options come with more blacked-out days, mostly busy times like holidays and summer vacation.
  • The Enchant pass includes a 25% discount on parking and 10% on merchandise. Its price rose 8% to $699. Imagine, a pass specifically for Southern California residents, is increasing 13% to $449.



Home Building Dropped Sharply in July – Wall Street Journal, 8/16/2022

  • House construction in the U.S. continued to slow in July, as high inflation and higher mortgage rates make it more expensive to build and buy property.
  • Housing starts in July fell 9.6% from the month before to a seasonally adjusted annual rate of 1.45 million, the Commerce Department said Tuesday, down from a revised 1.60 million the prior month.
  • Economists surveyed by The Wall Street Journal expected the government to report 1.52 million housing starts for July.
  • Building permits declined 1.3% to 1.7 million.
  • The National Association of Realtors will release the latest sales figures for previously owned homes on Thursday. Economists surveyed by the Journal expect that sales declined 6.1% in July.

US Home-Sale Cancellations Soar in July as Buyers Pull Back – Bloomberg, 8/16/2022

  • Failed US home-purchase deals jumped in July as buyers continued to back away from the market amid rising mortgage rates.
  • Roughly 63,000 home-purchase agreements were canceled in July, equal to about 16% of properties that went into contract that month, according to an analysis by Redfin.
  • That was up from 15% of deals that fell apart in June. A year earlier, when the housing market was running hot, it was about 12.5%.

Joe Biden to Sign Bill Aimed at Lowering Drug Costs, Boosting Renewable Energy – Wall Street Journal, 8/16/2022

  • President Biden is set to sign into law sweeping legislation to lower prescription drug prices, boost the renewable energy sector and impose new taxes on large corporations.
  • The bill falls short of the ambitious vision Mr. Biden laid out during his presidential campaign and in the early months of his time in office. But it nonetheless marks a hard-fought win for the president, who less than a month ago was facing the prospect that a signature piece of his governing agenda was dead in the Senate.
  • Like the infrastructure law, many of the provisions in the climate, healthcare and tax legislation won’t go into effect right away, presenting a challenge for Democrats to explain how the measure will benefit voters demanding quick fixes to their economic woes.
  • On healthcare, the bill’s most immediate effects will start next year, when people on Medicare will see their insulin costs capped at $35 a month, seniors will be eligible to receive certain vaccines free and people who received Affordable Care Act subsidies through the 2021 American Rescue Plan will be able to count on another three years of those benefits.

U.S. Approves Nearly All Tech Exports to China, Data Shows – Wall Street Journal, 8/16/2022

  • The U.S. has identified intensifying technological competition with China as a top national-security threat. But a Commerce Department-led process that reviews U.S. tech exports to the country approves almost all requests and has overseen an increase in sales of some particularly important technologies, according to an analysis of trade data.
  • Of the U.S.’s total $125 billion in exports to China in 2020, officials required a license for less than half a percent, Commerce Department data shows.
  • Of that fraction, the agency approved 94%, or 2,652, applications for technology exports to China. The figures omit applications “returned without action,” meaning their outcomes were uncertain.
  • The result: The U.S. continues to send to China an array of semiconductors, aerospace components, artificial-intelligence technology and other items that could be used to advance Beijing’s military interests.

Drought Devastates U.S. Cotton Harvest – Wall Street Journal, 8/16/2022

  • Southwestern cotton growers are abandoning millions of parched acres that they planted in spring, prompting forecasts for the weakest U.S. harvest in more than a decade and sending prices sharply higher.
  • U.S. agricultural forecasters expect drought-struck farmers to walk away from more than 40% of the 12.5 million acres they sowed with cotton and harvest the smallest area since Reconstruction.
  • The U.S. Department of Agriculture on Friday slashed its forecast for the domestic cotton crop to 12.6 million bales, which are about 480 pounds apiece. That would be down 28% from last year, and the smallest crop since the meager 2009 harvest that helped set the stage for record prices.
  • The USDA also predicted some of the lowest end-of season inventories in decades.
  • December cotton futures, the most-traded contract, have risen by the maximum allowed by exchange rules for two consecutive sessions, ending Monday at $1.136 a pound. Last week, futures rose by about 13%, the sharpest weekly climb since March 2011, when prices were on their way to a record of $2.141 a pound.

Liz Cheney Faces Uphill Fight in Wyoming Primary Against Trump-Backed Opponent – Wall Street Journal, 8/16/2022

  • Wyoming Rep. Liz Cheney is widely expected to lose her re-election bid Tuesday, the last House Republican to face a primary who voted to impeach former President Donald Trump for inciting a riot at the Capitol on Jan. 6, 2021.
  • A poll released a week ago by the University of Wyoming’s Wyoming Survey and Analysis Center  showed Republican Harriet Hageman leading Ms. Cheney by nearly 30 percentage points.
  • The poll looked at likely voters of both parties because Democrats can switch their registration on Election Day to vote in the GOP primary. Analysts have predicted that there aren’t enough Democrats in Wyoming to pull Ms. Cheney over the line.
  • The margin of error in the survey was four percentage points. The three-term incumbent won her last Republican primary in 2020 with 73% of the vote.


Explosions Hit Russian Ammunition Depot in Crimea – Wall Street Journal, 8/16/2022

  • Explosions rocked an ammunition depot in Crimea, prompting the suspension of trains and marking a fresh blow to Moscow’s war effort.
  • The blasts were set off by Ukrainian saboteurs, according to a senior Ukrainian government official.
  • Russian officials also blamed sabotage for the explosions at the ammunition dump, at a disused farm near the village of Maiske, which left two people with minor injuries.
  • Authorities on the peninsula, which Russia’s military seized in 2014, evacuated more than 3,000 people from a 3-mile zone around the depot and stopped trains on the nearby train line, which sweeps up from the eastern edge of the peninsula to the Ukrainian mainland.
  • The explosions underscore Russia’s vulnerabilities as Ukraine seeks to retake territory in its south that Russia occupied in the early stages of the war.
  • Ukraine, which lacks the forces for a head-on assault, has sought to erode Russia’s ability to wage war by targeting ammunition dumps, command posts and bridges, usually with long-range rocket launchers provided by the U.S. Russia has reinforced its military in the south with thousands of troops that were transferred from eastern Ukraine.

Germany to Keep Last Three Nuclear-Power Plants Running in Policy U-Turn – Wall Street Journal, 8/16/2022

  • Germany plans to postpone the closure of the country’s last three nuclear power plants as it braces for a possible shortage of energy this winter after Russia throttled gas supplies to the country, said German government officials.
  • While temporary, the move would mark the first departure from a policy initiated in the early 2000s to phase out nuclear energy in Germany and which had over time become enshrined in political consensus.
  • The decision has yet to be formally adopted by German Chancellor Olaf Scholz’s cabinet and would likely require a vote in parliament. Some details are still under discussion, three senior government officials said.
  • A cabinet decision would also need to wait on the outcome of an assessment of Germany’s energy needs that will be concluded in the coming weeks but which the officials said was a foregone conclusion.

Foreign Investors Turned Net Buyers of Chinese Government Bonds in July – Wall Street Journal, 8/16/2022

  • Foreign investors once again became net buyers of Chinese government bonds in July—but only by a hair.
  • International investors have spent much of the past seven months reducing their exposure to the market, concerned about the geopolitical risks of investing in China following Russia’s invasion of Ukraine.
  • But foreign investors changed course in July. Their total holdings of Chinese government bonds edged up to 2.32 trillion yuan, the equivalent of $343 billion, last month.
  • That represented a small net inflow of roughly $487 million, breaking a five-month-long streak of net outflows.
  • The overall figures for July reflected an outflow of $8 billion. Still, the pace of overall outflows has slowed since March, when foreigners pulled a record $15 billion from the Chinese bond market. In all, foreign investors have cut their investments in China’s bond market by $82 billion since the start of February, the month when Russia invaded Ukraine.
  • They held a total of $518 billion yuan-denominated bonds at the end of July, down from roughly $526 billion in June, according to data from the China Central Depository & Clearing Co. and the Shanghai Clearing House.

Tencent Weighs Stake Sale in Chinese Delivery Company Meituan – Wall Street Journal, 8/16/2022

  • Tencent Holdings is looking to sell most or all of its stake in food-delivery company Meituan, people familiar with the matter said, as Beijing seeks to curb the power and influence of the country’s internet giants.
  • Tencent has held talks with investment banks to explore ways to dispose of at least a major portion of its roughly 17% stake in Meituan, one of the people said.
  • That stake was worth about $24 billion as of Monday’s market close, before a Reuters report about Tencent’s plan sent Meituan’s Hong Kong-listed shares tumbling on Tuesday.
  • Tencent declined to comment. Meituan didn’t respond to a request for comment. Tencent is set to report its April-June quarter results on Wednesday.

Factmonster – TODAY in HISTORY

  • The Revolutionary War battle of Bennington, Vt., won by American forces. (1777)
  • Baseball legend Babe Ruth died in New York City at age 53. (1948)
  • Cyprus, the third-largest island in the Mediterranean, became an independent republic. (1960)
  • Elvis Presley died at Graceland, his Memphis,Tenn., home, from heart failure at age 42. (1977)
  • Former Ugandan dictator Idi Amin died. (2003)

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