Coffee With Greta: Inflation Cools and Stocks Get Hot
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DJIA Futures: +88 (+0.3%)
SPX Futures: +24 (+0.6%)
NASDAQ Futures: +120 (+1%)
Good morning friends!
Futures are rising as new data shows inflation pressures are slowing.
Let’s get right to it!
PCE Inflation Cools
The Bureau of Labor Statistics personal consumption expenditures index shows inflation pressures slowing in the U.S. economy.
The headline PCE price index rose 0.2% monthly and 6.3% year-over-year.
That was a slowdown from 0.9% monthly and 6.6% annually in March.
The core PCE price index, which excludes food and energy, rose 0.3% monthly and 4.9% annually.
That was also a slowdown from March and in line with economists’ expectations.
The core PCE index is the Fed’s preferred measure of inflation.
The data supports the Fed’s theory that inflation may have already peaked and is now trending downward.
The PCE index also showed an increase in incomes and consumer spending last month.
Personal incomes rose 0.4% monthly, slightly lower than expectations for 0.5%.
Consumer spending was up 0.9%.
Adjusted for inflation, disposable incomes were flat and consumer spending rose 0.7%.
Gap Plunges After Slashing Guidance
Gap (GPS) shares are plunging 18.8% ahead of the open after slashing its full-year guidance.
The clothing retailer reported a fiscal Q1 loss of $0.44 per share on $3.48 billion in revenue.
Revenue was down 13% year-over-year but slightly ahead of analysts’ expectations.
Same-store sales dropped 14% year-over-year vs expectations for a 12.2% decline.
Online sales were down 17% compared to a year ago and in-store sales fell 10%.
Gap sales dropped 11%, Old Navy sales tumbled 22%, Athleta sales fell 7%, and Banana Republic sales rose 27%.
The company forecast fiscal 2022 adjusted earnings between $0.30 and $0.60 per share, that’s down from previous guidance for4 $1.84 to $2.05.
Analysts were looking for EPS guidance of $1.34.
Gap’s CFO said the revised outlook accounts for “executional challenges” at Old Navy, uncertain macroeconomic conditions, and inflationary pressures.
Big Lots Tumbles On Surprise Q1 Loss
Big Lots (BIG) shares are falling 17.3% in premarket trade after reporting a surprise loss in the first quarter.
The retailer reported a loss of $0.39 per share on $1.37 billion in revenue.
That was sharply lower than analysts’ expectations for a profit of $0.91 per share on $1.46 billion in revenue.
Big Lots said same-store sales slowed in April, prompting it to markdown prices.
The CEO blamed that slowdown on inflationary pressures.
The company’s gross margin rate shrunk to 36.7% last quarter from 40.2% a year ago.
Big Lots expects comparable sales to fall year-over-year in Q2 and its gross margin rate to be in the low-30s as costs rise.
Costco Sales Growth Falls Short
Costco (COST) shares are down 1.6% ahead of the open after beating fiscal Q3 revenue expectations but missing growth estimates.
The big-box retailer reported earnings of $3.04 per share on $52.6 billion in revenue.
That was in-line with analysts’ EPS expectations and better than revenue estimates for $51.56 billion.
But same-store sales growth fell short.
Costco said sales at stores open for at least a year jumped 10.8% year-over-year vs expectations for 11.8% growth.
Ulta Rallies On Earnings Beat, Strong Guidance
Ulta (ULTA) shares are up 8.1% in premarket trade after beating Q1 expectations and raising its full-year outlook.
The beauty retailer reported earnings of $6.30 per share on $2.34 billion in revenue.
That was better than analysts’ expectations for EPS of $4.46 on $2.12 billion in revenue.
Comparable sales jumped 18% year-over-year, with double-digit increases across all major categories.
Ulta also said it has opened 10 new stores this year.
The company forecast full-year revenue between $9.35 billion and $9.55 billion with comparable sales growth between 6% and 8%.
That was up from the previous forecast for comparable sales growth between 3% and 4% with revenue between $9.05 billion and $9.15 billion.
Ulta also expects full-year earnings between $19.20 to $20.10 per share vs the previous outlook for $18.20 to $18.70.
The company still plans to open 50 new stores total in 2022.
Dell Jumps On Earnings Beat
Dell Technologies (DELL) shares are up 11.5% ahead of the open after crushing fiscal Q1 earnings expectations.
The laptop maker reported non-GAAP earnings of $1.84 per share on $26.1 billion in revenue.
That beat the company’s own forecast for EPS of $1.25 to $1.50.
Analysts were expecting $25 billion in revenue.
Sales in Dell’s Infrastructure Solutions Group (ISG) jumped 16% year-over-year to $9.3 billion.
That was better than Wall Street’s expectations for 5% growth to $8.3 billion.
The Client Solutions Group, which is Dell’s PC business, brought in $15.6 billion in revenue.
That was up 17% compared to a year ago and higher than consensus estimates for $15.5 billion.
Twitter Shareholders Sue Twitter and Musk
Twitter (TWTR) shareholders are suing the social media company and Elon Musk over their chaotic handling of Musk’s acquisition deal.
The proposed class-action suit accuses Musk of violating California’s corporate laws and engaging in market manipulation by creating doubt he would go through with the deal.
It says, “Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter’s stock down substantially in order to create leverage that Musk hoped to use to either back out of the purchase or to re-negotiate the buyout price by as much as 25% which, if accomplished, would result in an $11 billion reduction in the Buyout consideration.”
The suit also claims he financially benefitted by delaying the disclosure of his stake.
Shareholders allege Musk bought the stock while he knew insider information from private conversations with board members and executives, including former CEO Jack Dorsey.
TWTR shares have seen volatile swings since the Tesla (TSLA) boss originally disclosed his investment in early April.
The stock popped to a high of $54.57 per share on April 5, the day after Musk revealed his stake.
But shares have since tumbled about 12% since he offered to buy the company at $54.20 per share.
Oil Slips
Oil prices are slipping even as supply concerns remain.
West Texas Intermediate crude futures are down 0.4% to about $113 bbl with Brent crude futures flat at $117 bbl.
The EU is still working to get Hungary on board with its proposed ban of Russian oil imports.
The European Council president said he’s confident a deal can be reached before the next meeting on May 30.
Both WTI and Brent are on track for weekly gains.
Gas Prices Halt Record-Breaking Streak
U.S. gas prices slipped today after setting a fresh record for 17 straight days.
AAA shows the national average for regular dipped back to $4.599/gal overnight.
The price for regular is still nearly 50 cents higher than a month ago and up more than $1.50 from this same time last year.
Diesel prices are continuing to cool, slipping to $5.530/gal today.
Consumer Sentiment Expected To Be Unchanged
The University of Michigan releases its final consumer sentiment index for May at 10:00 a.m. ET.
That survey is expected to be unchanged from the flash reading of 59.1 earlier this month.
That marked the lowest reading since 2011, down from 65.2 in April.
The sentiment index also includes consumer inflation expectations for the next 1-year and 5-years.
In Case You Missed It
- The National Association of Realtors reported pending home sales tumbled 3.9% in April. That was higher than economists’ expectations for a 2% decline and the sixth straight monthly drop. A drop in pending sales is a leading indicator for existing home sales in the future. The NAR says the housing market boom may be coming to an end as mortgage rates jump.
- The number of home listings jumped sharply last week. Realtor.com says it saw a 9% increase in the supply of homes for sale last week compared to a year ago. Redfin (RDFN) also reported new listing rose nearly twice as fast over the 4 weeks ending May 15 compared to the same time last year. Experts say the jump comes as homeowners worry they may miss out on the hot housing market.