Here are the most important news, trends and analysis that investors need to start their trading day:
1. Stock futures fall as inflation hits another retailer
Traders on the floor of the NYSE, May 17, 2022.
U.S. stock futures fell on Wednesday as rising inflation hit another retailer. Target fell more than 20% in pre-market, shortly after a big profit loss. A similar picture of profits at Walmart was revealed on Tuesday. Dow Jones stock closed nearly 11.4% lower in its worst single-session decline since 1987. Walmart shares were down another 1.5% in Wednesday’s premarket. One of the drivers of soaring inflation is the cost of energy. US oil prices jumped 2.5% on Wednesday, rising above $115 a barrel again.
Despite Walmart’s troubles, the Dow Jones Industrial Average rose 431 points or 1.3% on Tuesday. The S&P 500 and Nasdaq gained 2% and nearly 2.8%, respectively, in Wall Street’s latest attempt to rally after weeks of steep losses. The Nasdaq was still in a bear market defined by a decline of 20% or more from its previous high. The Dow Jones and S&P 500 were still in correction, defined by a decline of 10% or more from previous highs.
2. The target is the one who was criticized on Wednesday for a big shortfall
Employees help customers at the checkout of a supermarket on May 11, 2022 in New York City.
Liao Pan | China News Service | Getty Images
The premarket drop in Target shares came after the retailer reported first-quarter adjusted earnings well below estimates on Wednesday morning. The company’s earnings were hampered by high transportation costs, higher markdowns and weaker-than-expected sales of discretionary items, from televisions to bicycles. Like Walmart on Tuesday, which also cited inflationary pressures and higher inventory, Target’s revenue beat estimates. Target reiterated its sales forecast, which calls for mid-single-digit percentage growth this year and beyond.
3. Lowe’s is also under pressure after weaker-than-expected sales
Pallets of garden supplies are stacked in the parking lot of a Lowe’s store in San Bruno, California.
David Paul Morris | Bloomberg | Getty Images
In contrast to Home Depot’s strong quarter and the previous day’s forecast, rival Lowe’s reported first-quarter revenue Wednesday morning that beat expectations. Lowe’s shares fell 2% in premarket. The company has seen cooler spring weather hurt demand for supplies for outdoor DIY projects. Home Depot held up as professional sales overtook DIY. Lowe’s, which gets about 75-80% of its total sales from DIY customers, beat its profits. The company reiterated its full-year sales outlook of $97 billion to $99 billion.
4. Slowdown in housing data expected as Fed chief Powell talks tough on rates
Lumber at the site of a home under construction in the Cielo at Sand Creek by the Century Communities housing development in Antioch, California, U.S., Thursday, March 31, 2022.
David Paul Morris | Bloomberg | Getty Images
The government’s report on housing starts and building permits for April, released at 8:30 a.m. ET, is expected to show a drop in construction activity. Economists expect a decline of 2.4% to an annual rate of 1.75 million units. Housing starts edged up 0.3% in March. Building permits in April are expected to fall 2.8% to 1.82 million. Permits rose 0.4% in March.
- Weekly mortgage demand from homebuyers fell 12% as rising rates took their toll. It was the first weekly decline in about a month. Inflation also doesn’t help consumers feel particularly good. Refinancing applications continued their slide, down 10% for the week.
The 10-year Treasury yield rose Wednesday, just around 3%. The strength of the benchmark yield can be attributed to comments from Federal Reserve Chairman Jerome Powell. In an interview with The Wall Street Journal on Tuesday, Powell said the central bank would not hesitate to keep raising interest rates until inflation subsides.
5. JPMorgan investors send CEO Jamie Dimon a message on compensation
JP Morgan CEO Jamie Dimon speaks during the Boston College Chief Executives Club luncheon in Boston, Massachusetts, U.S. November 23, 2021.
Brian Snyder | Reuters
JPMorgan Chase’s Jamie Dimon received a rare reprimand on Tuesday night as shareholders voiced their disapproval of his $52.6 million retention bonus. Only 31% of investors attending JPMorgan’s annual shareholder meeting backed the award which was part of the CEO’s 2021 compensation package and designed to keep him at the helm for another five years. While the vote was non-binding, JPMorgan’s board said it took investor feedback “seriously” and wanted Dimon’s bonus to be a one-time event.
—CNBC Sarah Min, pippa stevens, Melissa Repko and Hugh’s son contributed to this report.
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