Wall Street's rally couldn't find the energy to extend into day two on Tuesday, Aug. 15, as retail took focus and investors looked beyond geopolitical headlines.
While the Dow Jones Industrial Average was up 0.02%, the S&P 500 decreased 0.05% and the Nasdaq slumped 0.11%. The S&P 500 was lower for its first day in three.
Retail sales in July rose at a faster pace than anticipated, reaching a seven-month high in a positive sign that consumers were spending in the first month of the third quarter. Sales increased by 0.6%, according to the Census Bureau, higher than an expected rise of 0.4%. Core retail sales rose by 0.5%.
"With job growth accelerating, low unemployment, and even wages ticking up, we're seeing consumers open up their wallets and spend," said E*TRADE vice president of investment strategy Mike Loewengart. "While it's good to see shoppers shopping, that doesn't mean a rising tide will lift all boats. Make no mistake, while these numbers are encouraging, there will continue to be winners, and serious losers in this tumultuous space."
The divides in the retail sector were laid bare in earnings on Tuesday. Advance Auto Parts Inc. (AAP) slumped 20% after falling short of earnings estimates over its recent quarter. Adjusted profit of $1.58 a share fell short of an estimated $1.65. Revenue was flat at $2.264 billion, in-line with estimates. Same-store sales were also flat. For the full year, the retailer anticipates same-store sales will fall between 1% and 3%.
Home Depot Inc. (HD) reported quarterly earnings that exceeded estimates and comparable-store sales growing more than anticipated. Profit rose to $2.25 a share from $1.97 a year earlier, 4 cents higher than targeted. Revenue of $28.11 billion topped estimates of $27.83 billion. Comparable-store sales increased 6.3%, higher than an expected 4.9% gain.
The DIY retailer increased its earnings-per-share guidance to $7.29 a share for the full year, up from a previous estimate of $7.15. Analysts anticipate $7.24 a share. Current earnings guidance implies 13% growth from a year earlier.
Dick's Sporting Goods Inc. (DKS) tumbled more than 23% after a disappointing quarter. The sporting goods retail chain earned 96 cents a share over its second quarter, a nickel below estimates. Revenue increased 9.6% to $2.16 billion, but fell short of consensus by $10 million. Comparable sales increased by 0.1%, far less than estimated growth of 1.8%. For full-year earnings, Dick's anticipates $2.80 to $3 a share, well below estimates of $3.62.
TJX Companies Inc. (TJX) posted surprise earnings growth over its recent quarter. The parent of off-price retailer T.J. Maxx earned 85 cents a share, surprising analysts looking for earnings to hold flat year-over-year at 84 cents. Same-store sales increased 3%, while overall revenue rose 6.1%. The company also boosted its fiscal 2018 earnings guidance.
Coach Inc. (COH) reported a mixed quarter. Net earnings increased to 53 cents a share from 29 cents in the year-ago quarter. Adjusted earnings of 50 cents a share exceeded analysts' forecasts by a penny. Sales dipped 1.7% to $1.13 billion and fell short of estimates by $20 million. For the full year, Coach expects revenue of $5.8 billion to $5.9 billion and earnings of $2.35 to $2.40 a share. Analysts anticipate $5.03 billion in sales and $2.40 in earnings per share.
Around 92% of S&P 500 companies have reported earnings so far this season. Of those, 73.7% have exceeded earnings estimates, above the historical average of 64%, according to Thomson Reuters data. More than 68% have topped revenue consensus, also above an average of 59%. Consumer discretionary and staples stocks have seen the slowest earnings growth, up 3.6% and 4.6%, respectively.
On the international front, North Korean leader Kim Jong-un has opted to freeze his planned attack on Guam, instead waiting for signs the U.S. is ready to "ease tensions," according to a state news service. Kim said an attack could for forward "if the Yankees persist in their extremely dangerous reckless actions." The authoritarian nation had threatened the U.S. territory of Guam last week in retaliation for increasingly aggressive language from President Donald Trump.
In comments throughout last week, Trump promised "fire and fury" should North Korea continue to issue threats. On Friday morning, he tweeted that the U.S. military was "locked and loaded" in case of "unwise" actions by North Korea.
Markets managed to shake off those worries on Monday, Aug. 14, to post their best performance in months. The S&P 500 gained 1% and the Nasdaq added 1.3%. It was the S&P 500's best day since a 1.08% increase on April 24 and the third best daily increase of the year.
"As long as the economic expansion continues, the markets are likely to recover from geopolitical-related volatility," Jason Pride, director of investment strategy at Glenmede, wrote in a note. "This eight-year bull market has coincided with geopolitical events such as the Arab Spring, fears of a European Union breakup, annexation of Crimea and the Greek debt crisis."
Manufacturing activity in the New York region reached to a three-year high in August. The Empire State Manufacturing Index increased by 15 points to 25.2, far better than an anticipated unchanged level of 9.8. Any level above zero suggests growth.
Business inventories increased in June at a faster pace than anticipated. The Census Bureau reported a 0.5% rise in manufacturers' and trade inventories in June, higher than a 0.4% expected gain. Sales climbed 0.3%.
The National Association of Home Builders' housing market index unexpectedly improved in August. The measure increased by 4 points to a level of 68. Homebuilder sentiment had reached an eight-month low in July. Analysts anticipated a retreat to 65.
Dow component General Electric Co. (GE) was lower on Tuesday after billionaire Warren Buffett and his firm Berkshire Hathaway dropped its position in the company. According to a Securities and Exchange Commission filing, Berskhire sold all of its stake in GE, while reducing its positions in Costco Wholesale Corp. (COST) , Sirius XM Holdings Inc. (SIRI) , and IBM Inc. (IBM) .
Prior to the end of March, Berkshire held more than 10 million GE shares, worth a total $315.4 million. The position was just a fraction of its $3 billion investment in preferred stock and warrants from October 2008, the height of the financial crisis.
Berkshire also acquired a large stake in Synchrony Financial, the credit-card lender GE spun off in 2014. The $520.7 million position pushed Synchrony shares higher in premarket trading.
Pandora Media Inc. (P) rose over 4% after naming Roger Lynch as its new CEO and president. Lynch will assume the positions as of Sep. 18.
"I cannot imagine a more important and exciting time to join Pandora," Lynch said. "With a massive, diverse and highly engaged audience, a market-leading digital advertising business, a best-in-class product portfolio and an extremely passionate and talented group of people, Pandora is well-positioned to capture an even greater market opportunity."
Lynch, CEO of Sling TV, the online pay-TV service owned by Dish Network Corp. (DISH) , will succeed Tim Westergren as CEO.
In June, Westergren was pushed out of the company that he co-founded. His tenure had been criticized by Greg Maffei, CEO of Liberty Media Corp. (FWONA) , which controls Sirius XM, for spending millions of dollars building an on-demand music service to rival Spotify Ltd., Alphabet Inc.'s (GOOGL) YouTube and Amazon (AMZN) Prime Music, among others.
Naveen Chopra who has been serving as the company's CEO in the interim will keep his role as finance chief.
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