Equities Outlook: Walmart and Home Depot beat earnings expectations

US stock markets rallied last week after the softer than expected inflation print reported last Thursday, reignited hopes that the Fed will slow down its aggressive monetary policy tightening practices as inflationary pressures appear to have peaked and are slowing down. This week, the easing of producers’ price index provided more support for the equities sector at the expense of the dollar. In this report we aim to present the recent earnings releases results of Walmart и Home Depot for the third quarter and conclude with a technical analysis of Dow Jones index.

Walmart showcases resilient sales in Q3

Walmart, (#WMT) the retail consumer stables giant, famous for its hypermarkets across the United States and Mexico, was in the greens yesterday, closing the day near the $147 mark. Walmart is up marginally, by roughly 2% on a year-to-year basis, while its 52-week trading range is between $117 and $160. Yesterday, the company released its third quarter earnings report, with the results beating both revenue и EPS expectations, causing its share price to rise by more than 6.5%. In regards to the figures released, Walmart exceeded revenue projections by $4.7billion in the third quarter and EPS reported, beat forecasts by 18 cents. The results led analysts to upwardly revise their projections for the next quarter. Traditional stores contributed the most to the success, with comparable sales growth of 8.2% in the US for the third quarter, as well as the 16% growth in the e-commerce segment of the business. It is evident that consumer spending trends are shifting as inflationary pressures persist in the US economy, pushing high income earners to opt for less-pristine retail stores. The company’s CEO McMillon commented that “customers that came to us less frequently in the past are now shopping with us more often, including higher-income customers”, highlighting the shift in consumers’ spending trends has indeed been affected by inflationary pressures as they continue to take a toll on their purchasing power. Furthermore, the company expects the trend to continue going forward, forecasting that more customers and members will be choosing Walmart, attracted by value and assortments the retailer offers, despite the cost of everyday items being still stubbornly high across many of their item categories. Even though, Walmart’s executives appeared optimistic going forward, the company’s CFO acknowledged the possible adverse effects inflation can bring. “While we’re encouraged by our position and our confidence in our business remains high, the macro backdrop remains challenging as persistent inflation is impacting the consumer and our business”. Lastly, of material importance for Walmart’s price action will be the Retail sales rate for October expected later today and could provide further support for the stock should the actual rate meet the expectations.

Home Depot records positive earnings surprise

The Home Depot, Inc. (#HD) the consumer discretionary colossus, famous for its home improvement shops for retail consumers, was in the greens yesterday, closing the day near the $312 mark. Home Depot’s stock price is down by roughly 23% on a year-to-year basis, while its 52-week trading range is between $264 and $420. The company announced its Q3 earnings report results yesterday, and analysts were surprised to see the retailer beating both EPS and Revenue estimates. The results showcased resiliency from Home Depot navigating through a challenging and tumultuous period of high interest rates, surging inflation и supply chain disruptions alongside intensifying concerns about rising US mortgage rates. More specifically, the company beat EPS forecasts by 12 cents and Revenue reported an upward surprise of more than $900 million. Following the release, the upward revisions for the future performance of the company increased, with analysts appearing optimistic for Q4. The better-than-expected results were due to the strong comparable sales in both Pro и DIY customer segments showcasing robustness amidst a period were home improvement и house remodeling indicators pointed to degrading demand conditions.  On the flip side, elevated inventory levels were an area seen as problematic, since the inventories turnover decreased in Q3 signaling stock replenishing inefficiencies and the inventory growth primarily reflected the inflationary problem as well as strategic decisions in response to the supply chain disruptions. All things considered, the results were apprehended as positive by analysts and led to increased levels of upward revisions for Q4.

Технический анализ

US30Cash H4 Chart

Support: 33200 (S1), 32500 (S2), 31850 (S3)

Resistance: 34040 (R1), 34800 (R2), 35520 (R3)

Looking at US30 4-hour chart we observe the upward movement of the index forming higher highs and higher troughs as indicated by the ascending trendline initiated on the 13^th of October. We hold a bullish outlook bias for the index given the ascending trendline, but we note the recent stalling of the price action near the 34040 (R1) resistance level. The RSI indicator below our 4 hour chart points to a reading of 54 showcasing slight bullish momentum in favour of the index, however the price action appears to be losing steam. Should the bulls remain in control и positive sentiment reignites, we may see the definitive break above the 34040 (R1) resistance level and head to higher ground towards the 34800 (R2) resistance barrier. Should on the other hand the bears take over, we may see the price action breaking below the ascending trendline, the follow up break of the 33200 (S1) support level and the price action possibly challenging the 32500 (R2) support base.

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Disclaimer:
This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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