The Daily Breakdown takes a closer look at retail earnings this morning, as well as Bitcoin’s quiet-but-clear rally toward record highs.
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Wednesday’s TLDR
- Mixed bag of retail earnings
- BTC nears record highs
- Tesla’s Musk looks to reassure
What’s Happening?
Today’s focus is on retail, with Target, Lowe’s and TJX Companies all reporting earnings this morning. Home Depot reported yesterday morning, adding to the recent takeaways.
Those takeaways? A little mixed.
Tariffs have introduced a significant challenge for retailers, who must now navigate supply chain adjustments while determining how much of the added cost can be passed on to consumers versus how much they must absorb themselves.
Last week, Walmart said it would attempt to pass those additional costs onto consumers, but quickly backed away from that stance.
Mizuho analysts called Target’s report “very messy,” after the retailer missed on earnings and revenue expectations and slashed its full-year sales guidance. For its part, TJX narrowly beat top- and bottom-line expectations, but missed on same-store sales estimates and provided earnings guidance for Q2 that slightly missed expectations.
In the case of Lowe’s, the company’s results were mostly in-line (and just ahead) of analysts’ consensus expectations, while management maintained its full-year outlook. That takeaway — combined with Home Depot’s report — seems to be mostly positive.
The Bottom Line: We can’t extrapolate too much from just a few earnings reports (especially when the conference calls haven’t finished yet). But remember, more than two-thirds of US GDP is driven by consumer spending. So far, this quarter has been a reassurance about consumer spending trends, but we want to see that remain the case going forward.
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The Setup — Bitcoin
JPMorgan is now on board with allowing clients to buy Bitcoin. During the company’s recent Investor Day presentation, CEO Jamie Dimon said, “We are going to allow you to buy it…We’re not going to custody it. We’re going to put it in statements for clients.”
This news is positive for Bitcoin, which has been flirting with a move higher, but each rally seems to fizzle out in recent trading.
BTC has hit a new monthly high in three straight days, including today. This has helped give a boost to Bitcoin ETFs, like IBIT as well as other Bitcoin-related stocks, like MicroStrategy.
In late April, Bitcoin broke out over a key resistance area, then consolidated nicely above that zone as it reached for $100K. Now holding above this key level, let’s revisit the charts.
BTC is pressing into a key resistance area on the charts as it nears its prior record highs. Note that Bitcoin hit this zone in December, then again in January, before embarking on a much larger retreat. That’s as markets went into a “risk-off” vibe amid escalating global trade tensions.
Now approaching this area again, investors are waiting to see what happens next.
If this area is again resistance, bulls will need to see where support comes into the play. The hope is that BTC will be able to hold above $100K in the event of a pullback. However, if shares can break out over this area, it could potentially trigger more upside momentum.
Options and ETFs
Investors who can’t or don’t want to buy BTC outright could consider another investment vehicle, like a Bitcoin ETF. In the case of IBIT, investors can also use options.
Investors who believe shares will break out — or those who are waiting for the potential breakout to happen first — can participate with calls or call spreads. If speculating on the breakout rather than waiting for it to happen first, investors might consider using adequate time until expiration.
For investors who would rather speculate on resistance holding, they could use puts or put spreads.
To learn more about options, consider visiting the eToro Academy.
What Wall Street is Watching
Tesla stock was volatile on Tuesday, as it was up almost 4% at one point, before finishing higher by 0.5%. Comments from CEO Elon Musk were the focus, which centered on launching autonomous vehicles in Austin, Texas. Musk also said he would pull back on future political contributions and would remain at the helm of Tesla for another five years.
UnitedHealth has been incredibly volatile. Shares fell more than 50% amid a five-week losing streak, but the stock seemingly found its footing near $250 last week, bouncing almost 30%. Now, shares are back under pressure this morning on reports that the company paid nursing homes to reduce hospital transfers for ailing residents. Check out the chart for UnitedHealth.
Baidu shares are inching higher in pre-market trading after the firm topped earnings and revenue expectations in its latest quarterly report. Baidu — which has been referred to as the “Google of China” by some investors — is hoping the quarter might help snap the stock out of its rut, with shares down 15% over the past year.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.