Retail doom and gloom ahead of holiday season

Good morning everyone,

 

In stocks, US retailers took a heavy hit on Tuesday after department store chain Kohl’s posted a big earnings miss and cut its profit outlook for the year. To compound matters, Macy’s warned that it had suffered a data breach. Kohl’s share price closed 19.49% lower, and Macy’s was down 10.9%. With investors spooked, other retailers followed the pair down, with Nordstrom closing 6.26% lower. For all three firms, the losses marked another poor day in a dismal year. Macy’s has been hit the hardest, with its shares down around 50% in 2019 so far, having already seen numerous store closures and job cuts. Whilst traditional retailers struggle around the globe, the big online players are attracting different headlines. This morning it emerged that Alibaba is set to raise as much as $12.9bn in its secondary listing in Hong Kong, in what will be the world’s biggest equity raising this year.

AMD leads the way as oil stocks slide again

Retailers were the main news in a largely quiet US trading session. The Nasdaq Composite was the only one of the three major US indices to post a positive day, climbing 0.24%. Among the 100 largest Nasdaq stocks semiconductor firm AMD, biotech company Biomarin Pharmaceutical and broadcaster Fox led the way, with share prices up 3.54%, 3.41% and 2.81% respectively. AMD has been the subject of a slew of analyst upgrades recently; its share price is already up more than 120% year-to-date. At the bottom end, hard drive specialist Western Digital fell 4.02%. Meanwhile, the share prices of oil giants Exxon Mobil and Chevron continue to slide after it was reported by Reuters that Russia is unlikely to agree to deepen cuts in oil output at a meeting of exporters next month.

S&P 500: -0.06% Tuesday, +24.47% YTD

Dow Jones Industrial Average: -0.36% Tuesday, +19.75% YTD

Nasdaq Composite: +0.24% Tuesday, +29.17% YTD

Halma leads UK stocks higher

A dip in the pound helped the exporter heavy FTSE 100 close higher on Tuesday, ahead of the hour-long election debate that was held in the evening. The index was led by life protection technology group Halma, which climbed 8.45% after reporting a profit jump driven by acquisitions. The stock is now up more than 50% for the year. Ferguson, the £15bn market cap plumbing products distributor, was among the worst performers on the day, posting a 2.2% share price drop. The FTSE 250 climbed 0.43% on Tuesday, led by emergency repairs business Homeserve. The group posted a 4.76% share price gain after announcing as part of its earnings report that it is acquiring a majority stake in advertising company eLocal USA for $140m.

FTSE 100: +0.22% Tuesday, +8.85% YTD

FTSE 250: +0.43% Tuesday, +17.29% YTD

Stocks to watch

Lowe’s Companies: Home improvement firm Lowe’s follows its larger rival Home Depot in reporting earnings this week. Home Depot stock dived 5.4% on Tuesday after missing sales expectations. GlobalData director Neil Saunders said in a note following Home Depot’s earnings report that he believes growth in the market is now being more evenly shared with Lowes, according to MarketWatch. Lowe’s has had a rockier year than its rival, including the announcement it would be cutting thousands of jobs in favour of outsourcing, but its shares are still up 23% year-to-date. Analysts are expecting earnings per share of $1.35 when the firm reports on Wednesday, versus the $1.04 it posted in the same quarter last year.

Target Corporation: Target is another large US retailer that has managed to fight back against the Amazon era successfully, and over the past two years its share price is up more than 90%. Speaking to MarketWatch, Raymond James analysts led by Matthew McClintock said that now Nike has ended its partnership with Amazon, Target could make the perfect partner for the sportswear company. “The brand’s distribution strategy perfectly aligns with Target’s heightened investment in both physical store experience, as well as digital capabilities,” the analysts said. Currently 16 analysts rate Target as a buy, two as an overweight, eight as a hold and one as a sell. The average 12-month target price is $118.60, versus its current $110.85.

NetEase: NetEase is a $37bn market cap Nasdaq listed Chinese technology stock, which is involved in computer and mobile gaming, advertising, e-commerce and more. It also, unusually, owns several pig farms – pork prices in China have been skyrocketing due to a disease that has hit farmers hard. In September Alibaba took a minority stake in NetEase Cloud Music for $700m in order to take on Tencent, which dominates music streaming in China. NetEase reports earnings at 9pm New York time (Eastern) on Wednesday.

Crypto corner

Bitcoin dropped to $7,992 overnight, its lowest level since late October. The break below $8,000 is leading some to suggest we are now in bear market territory. With price currently trading below key moving averages does go some way to support this. However on the flip side, with the $8,000 zone seeing a lot of activity over the past few months, we may see this area act as support. 

The other two big coins have been experiencing similar downward trends, with both Ripple and Ethereum having shed far more than 20% of their peak value seen in the last three months. Again, 99% of traders on eToro are in buying positions, pushing Ethereum off lows to trade up over 1% at $175 and Ripple up 0.65% at $0.2496.

 

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