Here Are 3 Hot Things to Know About Stocks Right Now

  • The Dow Jones Industrial Average ended slightly lower Tuesday after Home Depot (HD - Get Report) slumped.
  • Home Depot posted weaker-than-expected fourth-quarter earnings and forecast slower 2019 profit growth. The stock fell 0.8%.
  • Tesla  (TSLA - Get Report)   ended down just slightly after the Securities and Exchange Commission asked a judge to hold CEO Elon Musk in contempt of court for violating the terms of his securities fraud settlement with the agency.

Wall Street Overview

Stocks ended slightly lower on Tuesday, Feb. 26, after Home Depot (HD - Get Report) posted weaker-than-expected fourth-quarter earnings and U.S. housing starts for December declined sharply.

The Dow Jones Industrial Average fell 34 points, or 0.13%, to close at 26,058, the S&P 500 fell 0.08%, and the Nasdaq was down 0.07%. The Dow got a boost from  February's consumer confidence reading of 131.4, well ahead of economists' forecasts of 124. 

Federal Reserve Chairman Jerome Powell told U.S. lawmakers Tuesday that the central bank plans soon to reconsider its years-long effort to shrink its $4 trillion balance sheet, given recent "crosscurrents" in markets and the global economy.

The Fed has been shrinking the balance sheet since 2017, after swelling total assets from around $900 billion in the wake of the 2008 financial crisis. Shrinking the balance sheet was a part of monetary policy "normalization," essentially an effort to tighten financial conditions to keep the economy from overheating.

Housing starts in December fell 11% to an annual rate of 1.08 million, a two-year low. It was the lowest level since September 2016. Building permits rose 0.3% to an annual pace of 1.33 million.

"The biggest obstacles to a better, rising new housing starts report were declining consumer and small business confidence coupled with an expectation of rising interest rates, rising materials costs and continuing turbulence in financial markets," said Steven Skancke, chief economic adviser at Keel Point. He noted how the government shutdown that ended Jan. 25, delayed the collection of data and "made it more difficult to discern precise construction start and completion dates."  

Meanwhile, Donald Trump landed in Vietnam for a summit on Wednesday with North Korean leader Kim Jong Un in Hanoi in which the two men will attempt to solidify terms of their 2018 meeting in Singapore aimed at the denuclearization of the Korean Peninsula.

Trump told reporters in Washington Monday before heading to the region that his trade team was "very close" to cutting a deal with China following weeks of negotiations between Washington and Beijing. But he added that it "could happen fairly soon, or it might not happen at all."

Home Depot fell 2.1% after its profit came in weaker than expected thanks in part to a $247 million charge linked to its Interline brands division and the home-improvement retailer forecast slower 2019 profit growth.

Home Depot said earnings were $2.09 a share, shy of the Wall Street consensus of $2.16. Revenue was $26.5 billion, up 10.8% but again missing the consensus estimate. Home Depot said it took a 16-cent charge in the quarter linked to its Interline Brands division.

Looking into 2019, Home Depot said it sees comparable-store sales growth of around 5%, following a fourth-quarter rate of around 3.2% and a U.S. pace of 3.7%. It also sees full-year 2019 earnings growing 3.1% to $10.03 per share, well shy of the $10.26 Refinitiv forecast, and overall revenue to grow 3.3%, suggesting a total of $111.77 billion.

U.S. District Judge Alison Nathan said Tesla (TSLA - Get Report) CEO Elon Musk will need to write to the court by March 11 to show why he shouldn't be held in contempt. The Securities and Exchange Commission said Monday that a tweet from Musk earlier this month, in which he appeared to reveal material information on Tesla's production schedule, violated an October 2018 settlement that prohibited Musk from sharing company information without vetting from legal counsel.

"Defendant Elon Musk shall submit to this Court by March 11, 2019, briefing to show cause, if any, why he should not be found in contempt of the Court's Final Judgment," Judge Nathan wrote Tuesday.

The settlement itself, reached through Judge Nathan, was linked to an August 2018 tweet by Musk over plans to take the electric carmaker private that the SEC said was misleading to investors.

Tesla shares recovered from early declines to end off just 0.3% on Tuesday.

Caterpillar  (CAT - Get Report)  declined 2.44% on Tuesday after UBS cut its rating on the heavy machinery maker and cautioned that revenue and earnings forecasts will be pressured in a slowing global economy.

UBS lowered its rating on Caterpillar shares to sell from buy and cut its price target by around 20% to $125, arguing that key revenue drivers for the Peoria, Illinois-based company, including construction markets in North America and China as well as oil and gas production, will peak in 2019. That likely means earnings forecasts for 2020, which sit at a consensus of $13.27 a share and imply 8% year-on-year growth, are too high.

Macy's (M - Get Report) reported stronger-than-expected fourth-quarter earnings and said comparable-store sales in 2019 could rise thanks to a cost-savings program worth around $100 million. The stock rose 1.5%.

Macy's earned $2.72 a share, well ahead of analysts' forecasts of $2.53. Revenue slipped 2.5% to $8.455 billion, but were just ahead of analysts' estimates of $8.44 billion.

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