Wall St rises at open as Lowe's, Target boost retailers

Daniel Fowler
August 24, 2019

Lowe's (LOW) has released its second-quarter earnings report, showing an increase in revenue and earnings, which sent its stock soaring on Wednesday.

Nordstrom, Kohl's, Gap and other retailers closed higher.

For the three months ended August 2, the Mooresville, North Carolina, company earned $1.68 billion, or $2.14 per share.

The strong earnings came as yields on the 10-year US Treasury note pushed higher after faltering yesterday.

The stock market news on Asia markets had a bearish tone.

ON TARGET: After mixed results from retailers on Tuesday, Target soared 19.1% after easily beating profit forecasts for its second quarter as it pushes faster delivery and invests heavily in new private label brands.

The Q2 earnings report from Lowe's showed net earnings of $1.7 billion; up from the $1.5 billion reported in the second quarter of 2018.

Robust US consumer spending has helped stave off fears of an impending recession. The Nasdaq added 0.9% to 8,020.21.

Even after the bouts of turbulent trading this month, the S&P 500 is still having a good year.

Major indexes in Europe also finished broadly higher.

Investors are looking to Chairman Jerome Powell's speech on Friday for guidance about whether the Fed might cut rates at its next meeting in September.

The Trump administration has imposed a 25% tariff on $250 billion in Chinese imports.

Erdogan tells Putin Syrian offensive is causing humanitarian crisis
Opposition fighters had withdrawn from the area ahead of the army's entry into Idlib province's Khan Sheikhoun on Wednesday. President Recep Tayyip Erdoğan will pay a one-day-visit to Russian Federation on August 27, his office said on August 23.

The potential impact those tariffs could have on U.S. consumers could hurt sales for Target and other big retailers.

A look at Target and Lowe's earnings yesterday appeared to dim investors' concerns about the impact tariffs may have on United States consumers. Lowe's shares climbed 10.3% after the home-improvement chain beat profit estimates. "The results indicate that Lowe's was able to overcome unfavorable weather and lumber deflation by executing better on its retail fundamentals framework", he writes. The stock jumped 10.4%.

Lowe's 2.3% growth was still shy of the 3% same-store sales growth that rival Home Depot (HD) reported earlier this week. Bank of America Corp (BAC.N), Citigroup Inc (C.N), JPMorgan Chase & Co (JPM.N), Goldman Sachs (GS.N) and Morgan Stanley (MS.N) gained between 0.6% and 1.2%.

A DIMMER VIEW: Shares in Cree tumbled 13.8% after the maker of energy-efficient lighting gave investors a weak forecast as it deals with the fallout from the U.S.

In Asia, the Shanghai Composite Index edged up 0.1% to 2,883.44 and Hong Kong's Hang Seng fell 0.9% to 26,046.47. U.S same-store sales increased 3.2%. Hovnanian Enterprises vaulted 18.5% and LGI Homes rose 2.8%.

The highlight of the day will be the minutes from the Federal Reserve's July meeting, when it cut interest rates for the first time in more than a decade.

"Powell is in a hard spot in that you have a meeting coming up in September and everybody is looking to him", said Tom Martin, senior portfolio manager with Globalt Investments.

"I don't think there's anything in here that would be an 'aha!' warning sign to stocks that they're not going to get another rate cut." he said. While citing economic and trade uncertainties, the Fed pointed out the rate cut was only a "midcycle adjustment" rather than the start of a series of more accommodative policies.

The company also reported net earnings of $1.68 billion, a 10% increase from the same period previous year. This so-called inversion of the U.S. yield curve has accurately predicted the past five recessions.

U.S. WTI crude oil +1.5% to $56.99/bbl. The euro rose to $1.1089 from $1.1086.

CURRENCY: The dollar dropped to 106.56 yen from Wednesday's 106.62 yen. The euro weakened to US$1.1085 from US$1.1097.

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