$35 TRILLION Global Stock Market Meltdown!!! (#GotBitcoin)

$35 TRILLION in global market value erased since the beginning of the year. That’s 14% of all global wealth. Includes the $1T losses in crypto. $35 TRILLION Global Stock Market Meltdown!!! (#GotBitcoin)

For reference – 2008 was a 19% decline.

* Doesn’t include non-financial assets such as housing.

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Financial Inequality Grouped By Race For Blacks, Whites And Hispanics

Updated: 5-10-2022

Global Equity Markets Experience $11 Trillion Of Value Erased Since The End Of March

* European Stocks At ‘Oversold’ Levels, Nasdaq 100 Nearing That
* Goldman, JPMorgan See Buying Opportunities After Selloff

The rout in global equity markets that erased $11 trillion since the end of March may be reaching a floor for now as battered valuations, particularly among tech stocks, attract dip buyers.

For some, the argument rests on technical indicators, while others are looking at what corporates are offering, such as strong balance sheets and high dividend yields. Plus, investors have already priced in a lot of concerns, according to Peter Oppenheimer, chief global equity strategist at Goldman Sachs Group Inc., including about inflation and growth, central bank policy tightening and the war in Ukraine.

“Equities are starting to look attractive for medium-to-longer term buyers,” he told Bloomberg Television on Tuesday. While the downside risks still lurk, “all of that really is absorbed into the market already.”

European stocks rebounded on Tuesday, following another selloff across both sides of the Atlantic on Monday. The Stoxx 600 index was up 1.3% as of 1:30 p.m in London. S&P 500 and Nasdaq 100 futures pointed to a positive open for U.S markets, with the latter advancing as much as 1.8% as bargain hunters returned.

Amid concerns about how aggressively central banks will move, markets may also have taken some relief from Raphael Bostic, Federal Reserve Bank of Atlanta president, who said late Monday that he doesn’t support rate hikes bigger than 50 basis points.

The S&P 500 has fallen for four straight weeks, while the Stoxx 600 has tested the lows reached after the war in Ukraine erupted. In Europe, stocks are technically “oversold” based on the 14-day relative strength index, a momentum indicator measuring the magnitude of recent price changes, while the Nasdaq is also closing in on such levels. The reading has been a good predictor of a short-term bottom in the past year.

“While it has been realized on a lower volume profile with less panic, it is worth noting the Stoxx 600 just hit its most technically oversold level since March this year,” said Carl Dooley, head of EMEA trading at Cowen. “The last time that happened markets rallied over 10% in a straight line.”

Stocks are getting notably cheaper, as earnings growth forecasts continue to improve, while prices have plunged. Europe’s Stoxx 600 is now trading at 12 times its forward earnings, below its average forward price-to-earnings ratio of 13.2 since 2005. It’s suffered a 22% de-rating this year, a similar valuation drop to the S&P 500.

“We have seen quite a big correction now,” Oppenheimer said. “There are inevitably times when you are going to get some of the setback rebounding.”

Oppenheimer is not alone in seeing a floor. JPMorgan Chase & Co.’s Marko Kolanovic repeated his dip-buying calls on Monday, urging investors to add risk as central bank hawkishness has reached its peak. Still, the problem is that such calls by die-hard bulls have failed investors before.

Back in mid-April, Kolanovic said sentiment and positioning are too bearish, and advised investors to buy growth stocks including tech, biotech and innovation, alongside value stocks like metals and mining. The Nasdaq 100 index has ended every single week since then in the red.

For bears, such as Bank of America Corp.’s equity strategy team, the selloff may continue until October, and the S&P 500’s fall below 4,000 index points may tip it into a more severe rout as investors flee. Morgan Stanley’s Michael Wilson has said the “S&P 500 has minimum downside to 3,800 in the near term and possibly as low as 3,460.”

Much of that concern is tied to the economic backdrop, and the growing risk of stagflation looming large over the investment outlook. Even the long tradition of markets outperforming during earnings seasons has been challenged. While corporate profits both in Europe and the U.S. came in again above expectations, the beats have failed to assuage broad concerns.

“We have a perfect storm at the moment — inflation, Ukraine war, zero Covid policy in China, normalization of monetary policy,” said Vincent Juvyns, a global market strategist at JPMorgan Asset Management. Still, he insisted, “a lot is priced in at the moment” and “we may soon hit the bottom.”

Updated: 5-14-2022

$11 Trillion And Counting: Global Stock Slump May Not Be Over

* MS, Citi Strategists See Growth Woes Pressuring Stocks Further
* Key Technical Indicators Show Room For More Declines

A mass exodus of money, an $11 trillion wipeout, and the worst losing streak for global stocks since the 2008 financial crisis. The bad news is that it may not be over yet.

The selloff in the MSCI ACWI Index has dramatically lowered valuations of companies across the US and Europe, but strategists ranging from Michael Wilson at Morgan Stanley to Robert Buckland at Citigroup Inc. expect stocks to fall further amid worries of high inflation, hawkish central banks and slowing economic growth, especially in the US.

Money is continuing to leave every asset class and the exodus is deepening as investors rush out of names like Apple Inc., according to Bank of America Corp. Historically significant technical levels for the S&P 500 show the index has room to fall nearly 14% more before hitting key support levels, while the share of companies that have so far hit a one-year low is still a far cry from the number during the economic growth scare that slammed stocks in 2018.

“Investors continue to reduce their positions, particularly in technology and growth stocks,” said Andreas Lipkow, a strategist at Comdirect Bank. “But sentiment needs to deteriorate significantly more to form a potential floor.”

On the other side, some say the rout has already created pockets of value across sectors including commodities and even technology, which is valued on future earnings growth and, therefore, generally shunned during periods of high interest rates. The Nasdaq 100 rallied on Friday, but it still closed the week down over 2%.

Goldman Sachs Group Inc.’s Peter Oppenheimer has been among the most high-profile strategists to say it’s time to buy the dip, while Thomas Hayes, chairman at Great Hill Capital LLC, said “old school tech” stocks including Intel Corp and Cisco Systems Inc. were now trading at attractive multiples.

But amid the morsels of value, the broader market looks to be buckling as recession creeps more and more into the conversation. And even as growth worries mount, the inflation focus at the Federal Reserve and other central banks means investors can’t count any more on the monetary elixir that’s helped to keep alive the long-running bull market.

The MSCI ACWI has fallen for six straight weeks, the Stoxx Europe 600 is down 6% since late March, while the S&P 500 has dropped more than twice as much.

Here are some key metrics showing the potential downside for stock markets.

Falling Fast

The S&P 500 is still about 14% above its 200-week moving average, a level that’s previously been a floor during all major bear markets, except for the tech bubble and the global financial crisis. Strategists at Canaccord Genuity say there could be further declines on Monday on forced margin selling after yet another red week for the US benchmark.

Stressing Out

For all the recent declines — the S&P 500 is down more than 13% from its high on March 29 — stress indicators also aren’t at levels seen during comparable slumps. Fewer than 30% of the benchmark’s members have hit a one-year low, compared with nearly 50% during the growth scare in 2018 and 82% during the global financial crisis in 2008.

In addition, the 14-day relative strength index suggests the S&P 500 isn’t yet at the floor. While the Stoxx Europe 600 Index entered into oversold territory last week, the US benchmark has not yet hit that level, which is generally a precursor to a rebound.

Getting Defensive

Defensive stocks have been in demand as the specter of slowing growth hammers economically sensitive cyclical sectors. The Stoxx 600 Defensives Index is flat in 2022 versus a 15% drop for cyclicals, and strategists at Barclays and Morgan Stanley expect that trend to continue. At UBS Wealth Management, Claudia Panseri sees pricing for a “mild recession” in the cyclical-versus-defensive relative performance.

Comparison with past periods of defensive strength also signals the potential for more to come. Relative gains this year still trail the performance in 2016, brought on by a slowdown in China and Brexit worries, and in the early days of the pandemic in 2020.

Cheap-ish

Although valuations of technology stocks have fallen sharply — the tech-heavy Nasdaq 100 now trades at about 20-times forward earnings, the lowest since April 2020 — some strategists expect them to remain under pressure from aggressive monetary tightening by central banks.

Tech stocks just suffered their biggest weekly outflows of the year, according to Bank of America. And even after the crushing price drops, Valerie Gastaldy, a technical analyst at Day By Day SAS, says the sector is at risk of losing another 10% before finding a floor.

“I don’t think we have seen capitulation just yet,” said Dan Boardman-Weston, chief executive of BRI Wealth Management. “This week has been pretty brutal, and investor sentiment, especially in the technology area, is shot to pieces. We’re going to have a tricky few weeks and months ahead.”

Updated: 4-29-2022

Amazon Stock Falls As Loss Rattles Investors

Shares tumble 14%, the largest one-day drop since July 2006.

Shares of Amazon.com Inc. tumbled Friday after the online retailer posted its first quarterly loss in seven years, wiping out billions of dollars from the company’s market value and weighing on major stock indexes.

Amazon’s shares fell 14% to $2,485.63 a share, the lowest closing price for the stock since June 2020 and its largest one-day drop since July 2006.

Megacap growth companies such as Amazon have enjoyed blockbuster earnings and stock performances for much of the past two years, as Americans hunkered down during the Covid-19 pandemic and relied heavily on technology.

Now, some of those trends are starting to reverse. Amazon on Thursday reported that its revenue in the first quarter rose about 7%, the slowest pace in about two decades, as consumers returned to prepandemic habits and spent more money in person at stores.

Investors watch earnings from Amazon and its large-cap tech peers closely, in part because of the outsize influence that their performance has on major indexes. Amazon alone accounts for 4.1% of the market value of the S&P 500, FactSet data show. The S&P 500 fell 3.6% Friday amid a decline from Amazon and other

The drop wiped out roughly $206 billion of Amazon’s nearly $1.5 trillion market capitalization.

U.S. technology companies are navigating a difficult environment as they try to get a handle on changing consumer habits, soaring inflation, labor shortages and supply-chain crunches. Even more, they are vulnerable to rising interest rates. Higher yields can make growth stocks less appealing because they reduce the value that investors place on future earnings.

It was a tough month for big technology stocks. The so-called FAANG stocks—which include Facebook owner Meta Platforms Inc., Apple Inc., Amazon, Netflix Inc. and Google parent Alphabet Inc.—along with Microsoft Corp. lost $1.169 trillion in market capitalization in April, according to Dow Jones Market Data.

That marks the largest one-month market-cap loss for the group since Meta, then Facebook, started trading in 2012.

Including Friday’s stumble, Amazon has fallen 25% this year, worse than the S&P 500’s 13% loss.

Netflix has plunged 68% year-to-date and tumbled severely after the streaming service reported it had lost subscribers in the first quarter. Alphabet is down 21% for the year. This week, the company posted its slowest sales growth since late 2020.

Of the megacap technology stocks, only Apple has performed better this year, with a loss of 11% in 2022. Its shares lost 3.7% Friday.

The iPhone maker on Thursday reported revenue that far exceeded analysts’ expectations, though the company cautioned that the resurgence of Covid-19 cases in China threatens to hinder sales by as much as $8 billion in the current quarter.

Amazon Will Close Six Whole Foods Stores In Four States

* Chicago Mayor Calls Decision ‘Disappointing,’ Cites Concerns
* Englewood Location Opened In 2016 With Great Fanfare

Amazon.com Inc. said it’s closing six Whole Foods Market locations in four states, almost two months after shutting dozens of bookstores and gift shops around the country.

The closed locations, out of more than 500 stores nationwide, are in Montgomery and Mobile, Alabama; Tarzana, California; Brookline, Massachusetts; and the Englewood and DePaul neighborhoods of Chicago, Amazon said Friday. Five stores will close by May 6 and the Englewood location will close in coming months.

“As we continue to position Whole Foods Market for long-term success, we regularly evaluate the performance and growth potential of each of our stores, and we have made the difficult decision to close six stores,” a Whole Foods spokeswoman said in an email. “We are supporting impacted Team Members through this transition and expect that all interested, eligible Team Members will find positions at our other locations.”

Amazon on Thursday said it had excess warehouse space and employees when explaining an unexpected first-quarter loss and a bleak outlook for the current period. Online sales dropped 3% in the quarter. The shares declined 14% on Friday, the biggest one-day drop since July 2006.

Revenue from physical stores, which is mostly Whole Foods, was one of the few bright spots from Amazon’s quarterly results, with sales of $4.59 billion, up 17% from a year earlier.

Amazon in March announced it would shutter its physical bookstores, “Amazon 4-Star” locations and mall pop-up kiosks to narrow its brick-and-mortar efforts to the grocery sector. The Seattle-based company made its biggest move into physical retail in 2017 with the $13 billion acquisition of Whole Foods Market.

Since then, the company has also launched its own Amazon Fresh supermarkets and now has more than 20 locations in California, Illinois and the mid-Atlantic region.

Chicago Mayor Lori Lightfoot on Friday said the decision to close the two stores in her city was “disappointing.” She expressed concern for the workers as well as the harm to some residents in communities who risk having few other choices for their grocery shopping. The mayor also said new uses will need to be found so the locations don’t remain empty.

“Together with both communities and local elected leaders, my administration will work to repurpose these locations in a way that continues to serve the community and support the surrounding businesses,” Lightfoot said in a statement. “We as a city will continue to work hard to close food deserts that meet community needs with community at the table.”

The Englewood location opened in 2016 with great fanfare by then Mayor Rahm Emanuel, who had advocated for it as a way to bring fresh food and economic opportunity to a lower income, minority community on the city’s South Side. Amazon this month opened a new Whole Foods near the Chicago River North and Gold Coast neighborhoods.

Updated: 5-17-2022

Walmart Flashes A Warning Sign To The Entire Consumer Economy

The world’s biggest retailer is known for being careful about costs. But that’s harder to do when prices for everything are going up.

Walmart Inc. just highlighted the dark side of inflation.

The world’s biggest retailer on Tuesday reported profit that fell short of Wall Street expectations and downgraded its outlook for full-year earnings per share from a mid-single digit increase to a 1% decline.

Chief Executive Officer Doug McMillon said the bottom-line results were “unexpected” and reflecte the “unusual” environment. Walmart shares tumbled more than 11% on Tuesday, the most in 35 years.

The outcome is certainly surprising — and it should be a warning sign for the broader consumer economy.

Inflation is usually a benefit to supermarkets and consumer-goods companies, as higher prices elevate the value of their sales. If they can keep volumes stable, then their same-store sales automatically rise. Indeed, this is exactly what happened at Walmart: US same-store sales excluding fuel rose 3% compared with a year ago, topping analysts’ estimates of a 2% increase.

But higher staff costs, bloated inventories and more expensive fuel took their toll on profits. Each accounted for about a third of the shortfall.

First, Walmart’s wage bill expanded. It hired many employees at the end of last year to cover for staff who were out sick with the Covid omicron variant. But they recovered in the first half of the quarter, which meant the company had weeks where it was overstaffed.

Second, it sold less clothing and home furnishings than expected, and these are some of its more profitable categories. It had stocked up on such items amid last year’s supply chain snarl-ups, and inventories were up about a third to $61.2 billion.

Finally, it had to pay $160 million more for fuel in its U.S. business, and it could not pass this through to store prices as quickly as it had hoped.

The results are unusual, though, because Walmart has been famously cost-conscious. Its frugal philosophy is a big part of why it’s able to charge low price.

If Walmart is struggling even with its thriftiness and superior scale, then smaller and less efficient retailers are in for a very difficult time — not least because there was another note of caution in Walmart’s first quarter announcement.

The squeeze of inflation on discretionary incomes is starting to affect what consumers buy. Because Americans were having to spend more on food, they cut back on clothing and home furnishings more than Walmart had expected. Unseasonably cool weather, affecting items such as apparel and patio furniture, didn’t help either.

Walmart isn’t the only retailer to feel the pinch of high prices. While Home Depot Inc. reported better-than-expected first-quarter sales and saw an 11% increase in the average amount that each consumer spent in the first quarter, the number of customer transactions fell by 8%.

And the big-box bloodbath continued on Wednesday when Target Corp. cut its full-year margin forecast from at least 8% to to 6%. It said fuel and freight costs were $1 billion more than expected in the first quarter, and it saw little sign of the surge in expenses easing. The shares fell more than 20% in pre-market trading.

Despite the pressures on Walmart and Target, the retailers are relatively well placed to weather the storm. The share price falls look overdone.

Walmart should be able to work through its high stock levels in the coming quarters. It helps that it is facing these issues at the start of the summer season rather than the end. And its focus on value should help it win over more customers.

While some shoppers will inevitably trade down, or put fewer items into their baskets, others will move from pricier retailers to Walmart. Even though inflation increased the average amount each customer spent, the number of transactions in stores also rose slightly versus a year ago.

Meanwhile, Walmart’s scale means it should have more clout with suppliers, such as Procter & Gamble Co. and Nestle SA, as they try to pass down their own cost increases. That should help the retailer manage food price inflation.

And Target is one of America’s best-run retailers, and it has been doing many of the right things to attract consumers, such as refurbishing its stores and using them as delivery hubs for online orders.

Of course there are dangers, particularly the rise of the German no-frills supermarkets, Aldi and Lidl, which are expanding across the US. and competing on the same battleground of stable, low prices.

But if Walmart and Target are feeling the effect of the stretched consumer, other retailers have much more to worry about.

The big surprise, however, came from grocery giants Walmart and Target, both of which saw the biggest intraday declines since the weeks prior to the 1987 “Black Monday” market crash.

At the time of writing, WMT was down over 15% in five trading days, while TGT was nearing 25%. Both came after reports of deteriorating earnings amid a squeeze on consumer spending from inflation.

“Bear market rallies can last weeks or just a few days. The combo Walmart/Target bombs indicate the U.S. consumer might not be as healthy as thought. The 3-day rally could be over,” Fred Hickey, editor of The High-Tech Strategist, told Twitter followers on the day.

Updated: 5-18-2022

Target Hit By Worst Rout Since Black Monday As Margins Sag

* Company Sees Lower Operating Margin Amid Squeeze On Costs
* Share Plunge Drags Down Other Retailers, Hits Broader Market

Target Corp. plunged the most since 1987’s Black Monday crash after becoming the second big retailer in two days to trim its profit forecast.

A surge in costs during the first quarter shows little sign of easing, Chief Executive Officer Brian Cornell said. Operating profit will amount to only about 6% of sales this year, 2 percentage points below the previous forecast, Target said Wednesday. And the company’s first-quarter adjusted profit missed the lowest of 23 analyst estimates compiled by Bloomberg.

“We were less profitable than we expected to be, or intend to be over time,” Cornell said in a briefing. “Looking ahead, it’s clear that many of these cost pressures will persist in the near term.

Target’s worsening outlook echoes the darker panorama at Walmart Inc., which cut its profit forecast on Tuesday and also posted its biggest stock decline since 1987.

Target’s fuel and freight costs soared in the first quarter while a shift in consumer spending caused a sharper-than-expected slowdown in apparel and home-goods sales, prompting the company to mark down bloated inventories.

“For the last two years, these guys have done nothing but blow out expectations,” said Brian Yarbrough, a retail analyst at Edward Jones. “In one quarter, that’s all wiped away. Now it’s a ‘show-me’ story.”

Target sank 25% to $161.61 at the close in New York, the worst plunge since Oct. 19, 1987, an infamous market collapse known as Black Monday. The shares had fallen 7% this year before the results, outperforming a 26% drop in an S&P 500 index of consumer-discretionary stocks.

Target is now trading at its lowest level since late 2020, giving back much of its pandemic-era gains. The share plunge dragged down other retailers as well and provided fuel for the biggest market rout in almost two years. Costco Wholesale Corp., Dollar General Corp. and Dollar Tree Inc., which are preparing to report results next week, all posted double-digit declines.

Investors received another dose of bad news after the close when Bath & Body Works Inc. slashed its profit outlook. The company cited inflation as well as a decision to boost investment in information technology and its customer loyalty program. The shares slumped 4.5% in after-hours trading at 4:43 p.m. in New York.

The retailers’ results reinforced how profitability is starting to erode across the industry.

“The Target margin shortfall is more dramatic than what Walmart posted on Tuesday and clearly there are some industrywide/macro problems occurring,” Adam Crisafulli, an analyst at Vital Knowledge, said in a report. “Food/gas inflation are drawing dollars away from discretionary/general merchandise, forcing aggressive discounting to clear out product.”

On a conference call to discuss earnings, Barclays Plc analyst Karen Short questioned why Target was cutting its outlook so soon after an upbeat investor meeting in early March. Cornell said the company “did not anticipate the rapid change in conditions” that has occurred since then.

Adjusted earnings tumbled to $2.19 a share during the three months ending in late April, the Minneapolis-based retailer said in a statement. Analysts had been expecting $3.06 on average.

Like Walmart, Target reported robust sales as US consumers powered ahead despite the highest inflation in four decades. Target’s comparable sales climbed 3.3% in the first quarter, almost three times the average of analyst estimates compiled by Bloomberg. Revenue rose 4% to $25.2 billion. Wall Street had expected $24.3 billion.

‘Dramatic Change’

But strong demand for food and beverages, beauty products and household essentials went along with “lower-than-expected sales in discretionary categories,” Target said. That’s a sign that shoppers are pulling back as they struggle to buy basic goods. Cornell said customers are buying more of Target’s store brands, a common strategy for shoppers seeking bargains.

The CEO also cited a “dramatic change in sales mix” as the Covid-19 pandemic abates. Customers who bought television sets or kitchen appliances last year might be purchasing restaurant gift cards or luggage for upcoming trips this year, he said.

The value of Target’s inventory surged 8.5% from the previous quarter and 43% from a year earlier. Retailers generally try to avoid piling up inventory because it can incur costs. Indeed, inventory impairments were one of the causes of the company’s lower-than-expected profitability. Chief Financial Officer Michael Fiddelke said additional markdowns are likely in the current quarter.

Freight, Wages

“Unexpectedly high costs” are another challenge, Target said. During the current quarter, operating margins will be similar to the first-quarter result of 5.3%, according to the Minneapolis-based company. Analysts had been expecting 9.5%.

Cornell and Chief Financial Officer Michael Fiddelke reiterated their confidence in Target’s long-term ability to earn operating margins of 8% even as they abandoned that goal for this year. Fiddelke said the company has been raising some prices, although it’s also trying to avoid turning off customers with big increases.

“We have seen prices rise, but it is the last lever we pull,” he said. “You’ll see us continue to use all the levers.”

Walton Family Loses $34 Billion In Two Days, As Walmart Stock Continues Nosedive

The Walton heirs have lost a staggering $33.7 billion in the last two days as shares of their family’s retailing giant, Walmart, continue to be pummeled.

The reason for the carnage? The company said on Tuesday that its profits had been slammed by higher costs on everything from products to shipping to labor. As a result, net income for the quarter through April fell 25% from a year ago, with earnings per share coming in below analyst estimates.

Investors reacted badly, causing the stock to slide 11.4% yesterday, the worst single-day decline for the company since 1987. The wipeout didn’t end there, with shares falling nearly 7% on Wednesday. While the market was down broadly on Wednesday, that was steeper than the 4% loss suffered by the S&P 500.

“Our first-quarter performance is a disappointment to us, and we’re going to put it behind us and have a strong year,” said Walmart CEO Doug McMillon on the company’s earnings call.

The brunt of the decline was born by Jim, Rob and Alice Walton, children of founder Sam Walton, who saw $9 billion apiece wiped from their fortunes in the last two days.

The fortune of their sister-in-law Christy Walton, wife of deceased brother John, contracted by more than $1 billion. Her son Lukas, who received a larger share of his father’s estate, saw his net work knocked down by over $2 billion.

Ann Walton Kroenke and sister Nancy Walton Laurie, who inherited a stake in the company from their father Bud Walton (brother to Sam), also lost over $1 billion each.

The Waltons, who together own about half of Walmart’s stock, are still plenty rich, with a cumulative fortune of $212 billion as of late Wednesday, Forbes estimates. Jim remains the world’s 19th richest person in the world with a net worth of $59 billion, followed by sister Alice (No. 20 with $58.1 billion) and brother Rob (No. 21 with $57.9 billion).

Walmart Witnesses Biggest Crash In 25 Years, Consumer Stocks Follow

All eyes were on Walmart (NYSE: WMT) as the retail giant reported its much-anticipated Q1 results. Considering how worried investors are about the state of the markets, retailers like Walmart are considered one way of gauging the health of our economy. On that note, Walmart and other consumer stocks plunged after the retail giant’s Q1 results proved disappointing.

Walmart saw a 25% drop in quarterly earnings, with earnings per share coming in at $1.30 compared to Wall Street’s $1.48 EPS target.

Revenues were slightly better than expected, $141.6 billion versus $138.9 billion expected, but markets right now place more importance on hitting earnings targets than revenue targets. That’s especially the case now, with investors migrating away from growth stocks and into value investments.

So far this quarter, we’ve seen reoccurring theme amongst companies whose Q1 results fell short. Generally, it’s a combination of rising costs, specifically fuel, as well as rising labor prices, that tend to be the main explanations we see for why some companies seem to be struggling right now. Lingering supply chain issues and growing inventories have also been a problem in the retail world.

All of these were reasons cited by Walmart’s management on Tuesday as to why the company’s results were underwhelming. At the same time, management was quick to claim that investors were overreacted to the news as well.

While the earnings miss came as a disappointment to many, some experts aren’t too worried about this earnings miss. Many think this will be just a one-time thing, especially as Walmart has a history of doing well during bear markets.

“We don’t expect this miss to become a norm, seeing that Walmart has historically outperformed competition during tough economic times,” said analyst Arun Sundaram on Tuesday.

Despite this, the news was enough to send Walmart crashing. Shares plunged more than 11.4% over the course of the day, marking the worst single-day performance in over 25 years. The Dalton family lost over $17 billion alone in today’s selloff.

We’ve already started seeing headlines about how Walmart’s earnings miss could be a warning sign of further pain in the retail sector.

Other related consumer stocks were down as well following the Walmart news. Target (TGT), Dollar General (DG), and Dollar Tree (DLTR) were all down a few percent as well following the Walmart miss.

Updated: 5-19-2022

Retail Stock Meltdown Shows Signs of Seeping Into Junk Bonds

* Debt From Macy’s, Bath & Body, Neiman Marcus Is Slumping
* Walmart, Target Just Saw Massive Stock Routs After Earnings

Retailers have gotten smacked in the US stock market this week amid worrisome earnings reports from Walmart Inc. and Target Corp. — and the pain is spreading to the industry’s bonds.

Macy’s Inc.’s notes maturing in 2029 and 2030 hit record low prices below 87 cents on the dollar on Thursday, according to Trace. Bath & Body Works Inc.’s unsecured bonds dropped after the company cut its earnings outlook. Neiman Marcus, which traded at par as recently as May 4, saw its 2026 bonds slip below 95 cents.

Bonds tend to hold up better than stocks during market routs, so the decline is potentially a bad sign and could signal investors are starting to get worried interest payments will be harder to make amid an economic slowdown. Retailers are grappling with escalating costs amid spiking inflation.

Walmart and Target both generated an enormous amount of concern about retailing this week. Both saw their stocks post the biggest one-day drops since October 1987 after they warned about a spending slowdown.

Soaring inflation has put pressure on retailers who are holding at least 20% more inventory than they have on average over the past three years, according to Bloomberg Intelligence analyst Mike Campellone, citing it as a “risk to profitability if consumer demand wanes.” Inventory is likely to swell more after earnings finish, he added.

“High inflation and labor costs add to this risk, and could negatively affect the credit metrics of investment grade and high-yield retailers,” he wrote in a note earlier this month.

Retail bonds are the worst performing sector in high-yield so far this year. The industry has collectively plunged 16% on a total return basis, according to data compiled by Bloomberg. That compares to an 11% loss for the overall Bloomberg high yield index.

Updated: 5-20-2022

Retailer Rout Erased $500 Billion, Stirs Worry of More Ahead

* Walmart And Target Plunged 19% And 29% Respectively This Week
* Dollar General, Macy’s And Costco Have Yet To Report Earnings

The wild swings in consumer stocks this week that erased about $500 billion in market value are far from over with earnings reports from well-known retailers including Dollar General Corp., Macy’s Inc. and Costco Wholesale Corp. still to come.

Volatility in consumer stocks reached levels not seen since the early days of the pandemic-driven rout as retailers from Walmart Inc. to Target Corp. cut their annual profit forecasts and stoked concern over the impact of rising inflation and the challenge to pass on higher costs to consumers.

Walmart and Target each posted their biggest one-day declines since 1987 after their results, with selloffs of 19% and 29%, respectively, this week. Given Walmart’s drop, Procter & Gamble Co. has overtaken the retailer as the biggest company in the S&P 500 Consumer Staples Index by market value.

Ross Stores Inc. was the latest to trim its forecasts for comparable sales and profit, fueling its biggest decline on record in data going back to 1985.

“The implications for retailers that have yet to report are not promising,” said John Zolidis, president of Quo Vadis Capital, after Walmart and Target’s bleak updates. Several brokerage firms, including Truist Securities and Oppenheimer, have trimmed profit expectations for retailers that have yet to release quarterly results, including Dollar General and Costco.

Gap Inc., which will report earnings after markets close on May 26, forewarned investors last month, slashing its quarterly sales outlook on “macroeconomic dynamics” and execution challenges at its Old Navy brand.

Here’s A Look At Some Of The Other Notable Retailers Slated To Report Next Week:

Macy’s Inc.

The department store operator will report first-quarter results ahead of the bell on May 26. The stock is down 31% this year, after more than doubling in 2021 with the company benefiting from pent-up demand as consumer mobility resumed. Shares are likely to be volatile after earnings, with an implied one-day move of 14%, according to data compiled by Bloomberg.

Dollar General Corp.

The discount retailer also reports earnings on May 26. Its stock is expected to move more than 8% in either direction after it releases results, data compiled by Bloomberg show. That’s bigger than the moves seen after the past eight quarterly reports were issued. Dollar General has declined 20% this year.

Costco Wholesale Corp.

All eyes are on Costco after peer BJ’s Wholesale Club Holdings Inc. bucked the trend this week and reported earnings and sales that grew in the quarter. As one of a few retailers that still reports monthly sales, the company’s April net sales increased 13.9% year-over-year after climbing 18.7% in March. Costco, which is due to report after the bell on May 26, has slumped 27% this year.

Updated: 5-21-2022

Amazon Aims To Sublet, End Warehouse Leases As Online Sales Cool

* Company Wants To Shed At Least 10 Million Square Feet Of Space
* Amazon Spooked Investors Last Month After Saying It Overbuilt

Amazon.com Inc., stuck with too much warehouse capacity now that the surge in pandemic-era shopping has faded, is looking to sublet at least 10 million square feet of space and could vacate even more by ending leases with landlords, according to people familiar with the situation.

The excess capacity includes warehouses in New York, New Jersey, Southern California and Atlanta, said the people, who requested anonymity because they’re not authorized to speak about the deals.

The surfeit of space could far exceed 10 million square feet, two of the people said, with one saying it could be triple that. Another person close to the deliberations said a final estimate on the square footage to be vacated hasn’t been reached and that the figure remains in flux.

Amazon could try to negotiate lease terminations with existing landlords, including Prologis Inc., an industrial real estate developer that counts the e-commerce giant as its biggest tenant, two of the people said.

In a sign that Amazon is being careful not to cut too deeply should demand quickly rebound, the 10 million square feet the company is looking to sublet is roughly equivalent to about 12 of its largest fulfillment centers or about 5% of the square footage added during the pandemic. In another signal that Amazon is hedging its bets, some of the sublet terms would last just one or two years.

The company declined to say which space it plans to sublet or confirm the amount.

“Subleasing is a very common real estate practice,” spokeswoman Alisa Carroll said. “It allows us to relieve the financial obligations associated with an existing building that no longer meets our needs. Subleasing is something many established corporations do to help manage their real estate portfolio.”

Prologis declined to comment.

Amazon spooked investors last month after reporting slowing growth and a weak profit outlook that it attributed to overbuilding during the pandemic when homebound shoppers stormed online. At the end of 2021, Amazon leased 370 million square feet of industrial space in its home market, twice as much as it had two years earlier.

In the April earnings report, the company said it expected the excess space to contribute to $10 billion in extra costs in the first half of 2022. The company didn’t divulge how much over-capacity it had, where it was located or what it planned to do with it. Subleasing surplus space is one way for Amazon to trim costs on space it no longer needs.

Amazon tasked the real estate firm KBC Advisors to evaluate the warehouse network and determine where to sublet and where to terminate leases, two of the people said. Both options carry costs.

Subletting warehouse space requires Amazon to remove all of its equipment so the new occupant can tailor it to their own needs. Lease terminations typically require the tenant to pay a percentage of the rent that would be due over the full term of the agreement.

It shouldn’t be hard to find tenants. The vacancy rate for industrial space is below 4%, an all-time-low, and rents were up 17.6% at the end of 2021, according to a February report from Prologis.
A $5 Trillion ‘Wealth Shock’ Is Cracking Americans’ Nest Eggs

* Outsized Wealth Gains That Worsened Inequality Now In Reverse
* Housing Downturn Seen Having Broader Impact As Rates Surge

The world’s richest nation is waking up to an unpleasant and unfamiliar sensation: It’s getting poorer.

Americans’ collective net worth had been climbing at a dizzying rate for the past two years, even as families and businesses contended with the ravages of Covid-19. Households piled up an extra $38.5 trillion from early 2020 to the end of last year, bringing their collective net worth to a record $142 trillion, the Federal Reserve estimates.

Just as the US is learning to live with the virus and spending shifts back toward pre-pandemic normal, it faces a new scary threat: A plunge in wealth since the start of 2022 that JPMorgan Chase & Co. estimates totals at least $5 trillion — and could reach $9 trillion by year-end.

So far, the richest Americans have borne the brunt, with US billionaire fortunes down almost $800 billion since their peak amid the sharp losses in stocks, crypto and other financial assets. But surging interest rates are also starting to rattle the housing market, where middle- and working-class families have the bulk of their wealth.

It all adds up to the sudden removal of a major prop to confidence: ever-bigger nest eggs. And it’s by design. To stamp out the highest inflation in decades, the Fed needs Americans to curb their spending, even if it requires an economic slowdown to get there.

“It’s painful to get back to normal after really being in a fantasy world last year,” said John Norris, chief economist at Oakworth Capital Bank. “It’s going to feel a lot worse than it actually is.”

Since the start of the year, the S&P 500 Index is down 18%, the Nasdaq 100 has lost 27% and a Bloomberg index of cryptocurrencies has plunged 48%.

That all amounts to “a wealth shock that is set to drag on growth in the coming year,” JPMorgan economists led by Michael Feroli wrote in a note Friday.

Fed Chair Jerome Powell and his colleagues have repeatedly said they’re actively aiming for such a slowdown, leaving it unlikely policy makers will move to address the Great Wealth Drop of 2022.

Billionaires were the biggest winners of 2020 and 2021. Now they’re losing more than almost everyone else. The Bloomberg Billionaires Index, a daily measure of the wealth of the world’s 500 richest people, has dropped $1.6 trillion since its peak in November.

Leading the way are the Americans on the index, who have lost $797 billion since their peak. Perhaps the most humbled by it all is the world’s richest person, Elon Musk.

He’s lost $139.1 billion, or 41% of his wealth, since November, when his net worth briefly surpassed $340 billion. Amazon.com Inc. founder Jeff Bezos, the second-richest person, lost $82.7 billion, or 39% of his peak wealth.

Today in America:
– the two richest people own more wealth than the bottom 40%
– the top 1% owns more wealth than the bottom 92%
– 45% of all new income has gone to the top 1% since 2009

Is that the kind of economy any working person ought to be satisfied with?

— Bernie Sanders (@BernieSanders) September 5, 2021

While the wealth losses among the top 0.001% reduce inequality, that won’t be much comfort to most people who worry about the U.S.’s widening disparities.

“In a relative sense, it’s going to make the inequity a little lower — but in an absolute sense, everyone suffers,” said Reena Aggarwal, director of Georgetown University’s Psaros Center for Financial Markets and Policy.

Like many, Aggarwal is concerned that falling markets will create problems for the broader economy. “Some correction was needed but this is a pretty huge correction, and it’s not stopping.”

A downturn in housing — made likely by a surge in mortgage rates to the highest since 2009 — threatens wider reverberations. Over the last decade, the robust real estate market added $18 trillion in market value to owner-occupied home valuations.

US spending has been lifted in recent years by owners tapping the enhanced values of their homes for cash. The practice of home equity extraction likely came to a halt this year. More than 40% of refinancings in the final quarter of last year saw homeowners pull cash out of their homes.

Real estate is far more evenly distributed than financial wealth. The top 1% owns more than half of U.S. holdings of stocks and mutual funds, and the bottom 90% owns less than 12%, according to Federal Reserve estimates. By contrast, in real estate the bottom 90% owns more than half of the total, while the top 1% holds less than 14%.

“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” Lawrence Yun, National Association of Realtors chief economist, said in a statement Thursday. “It looks like more declines are imminent in the upcoming months.”

What Bloomberg’s Economists Say…

While the plunging stock market will dent consumers’ net worth this year, the residual effect of last year’s surge in asset values — and the resilience in home prices so far this year — are major offsetting factors supporting consumption. As a result, personal spending is expected to grow faster this year than before the pandemic, even after the removal of fiscal stimulus.

— Yelena Shulyatyeva, Economist

It could take a while before Americans realize that their pandemic home-price gains have evaporated. Even the stock market selloff could take a while to translate into spending in a way that could tip the U.S. into recession.

“A general selloff in the equity market may have a dampening effect,” said Chris Gaffney, president of world markets at TIAA Bank, but there’s a lag for investors. “They look at their statements on a quarterly basis and all of a sudden they say, ‘Oh my goodness, my stock-market portfolio is down 20%, maybe I shouldn’t take that vacation,’ or ‘Maybe I shouldn’t buy that larger TV or a new car.’”

The Market Is Melting Down And People Are Feeling It. ‘My Stomach Is Churning All Day.’

Many are watching investments they meant for down payments, tuition or retirement shrink day after day.

The last time Todd Jones heard this kind of panic in his clients’ voices, it was 2008 and the global financial system was on the brink of collapse.

Mr. Jones, the chief investment officer at investment advisory firm Gratus Capital in Atlanta, now finds himself fielding similar calls. Two clients, both retirees, asked him this month to move their portfolios entirely to cash. Mr. Jones persuaded them to stay the course, saying the best way for investors to achieve their goals is to still be in the market when it eventually rebounds.

“Those people were not in a good place,” said Mr. Jones, 43. “They had a lot of anxiety about goals and dreams and being able to live their lifestyles.”

Stocks, bonds and other assets are getting hammered this year as investors wrestle anew with the possibility that the U.S. is headed toward recession. On Friday, the Dow Jones Industrial Average recorded its eighth straight week of declines, its longest such streak since 1932. The S&P 500 flirted with bear-market territory.

Families are watching the investments they meant for down payments or college tuition or retirement shrink, day after day.

They’ve seen big retailers like Walmart and Target record their steepest stock drops in decades this week, after earnings that signaled an end to the pandemic spending boom.

The market turmoil has scared corporate chieftains away from taking their companies public. In Silicon Valley, dreams of multibillion-dollar valuations have been replaced by the reality of layoffs and recoiling investors.

Stock prices have been hurt by forces that appear in nearly every cycle, such as rising interest rates and slowing growth. There are also idiosyncratic ones, including the rapid return of inflation after decades at a low ebb, a wobbling Chinese economy and a war in Ukraine that has shocked commodity markets.

The Federal Reserve has raised interest rates twice this year and plans to keep doing so to curb inflation, but that makes investors worry it will slow the economy too fast or by too much.

To investors it can feel there is no safe place. While the vast majority of individual investors are holding steady, that is in part because customary alternatives don’t offer much relief. Bonds, normally a haven when stocks are falling, have also been pummeled. The cryptocurrency market, pitched as a counterweight to traditional stocks, is sinking.

For Michael Hwang, a 23-year-old auditor in San Francisco, the market’s tumble means he could wind up taking out loans to get an M.B.A. He has been hoping to pay his tuition out of pocket when he eventually goes back to school.

For Arthur McCaffrey, an 80-year-old retired research scientist from Boston, it means wondering if he’ll live to see his investments recover.

Rick Rieder, the head of fixed income at giant asset manager BlackRock Inc., likened the state of financial markets to a Category 5 hurricane. The veteran bond trader has been in the business for three decades and said the rapid price swings are unlike anything he has seen.

“My stomach is churning all day,” he said. “There are so many crosscurrents of uncertainty, and we aren’t going to get closure on any of them for weeks, if not months.”

Investors are used to the Fed stepping in to calm markets, but many of the dynamics rattling stocks, bonds, currencies and commodities are out of the central bank’s control, said Mr. Rieder: “The Fed can’t solve the supply shortage of corn or fertilizers, or the inability to get natural gas into Europe. They can’t build a sufficient inventory of homes.”

The plunge is a U-turn from stocks’ runup in 2020 and 2021. Then, unusually low interest rates and a surging money supply—byproducts of the government’s efforts to stave off a downturn—pushed stock indexes to repeated new highs. Some investors say the decline was long overdue and, now that it has arrived, could be difficult to repair.

Melissa Firestone, a 44-year-old economist specializing in the energy market, sold many of her individual stocks and bought a fund that shorts the S&P 500, betting on a drop.

“The Fed is going too far, inflation is a nightmare and the real-estate market is going to crash,” she said.

Keith Yocum, a novelist and retired publishing executive who is 70, moved a third of his savings into money-market funds last year. Mr. Yocum doesn’t love keeping so much money in cash, especially with inflation eroding its value, but sees few better options.

In October, when stock prices were still hitting records, Craig Bartels moved most of his 401(k) and individual retirement account savings into money-market funds. Soon, he sold his cryptocurrency holdings and started shorting homebuilding stocks and Tesla Inc. through a brokerage account.

A 46-year-old real-estate broker in Zionsville, Ind., Mr. Bartels had looked to the distant past for advice, reading Ray Dalio’s recent book on economic history and Adrian Goldsworthy’s “How Rome Fell: Death of a Superpower.”

“This sounds like us right now,” he thought.

His 20-year-old son, a college student, had told him he was trading a few thousand dollars through a Robinhood account. To Mr. Bartels, it looked like another sign of a coming reckoning.

A generation earlier, he was a day-trading college student himself. He did well, he said, but knew many who were “throwing money at internet stocks and had no idea what they were doing.” The dot-com bubble of the late 1990s soon popped. Today, Mr. Bartels is happy he changed course when he did. “I don’t think we’re anywhere near the bottom,” he said.

Don McLeod, a former research manager at a Manhattan law firm, retired four years ago when the markets were strong. He checked his 401(k) account almost every day with glee.

When stocks started to turn in January, he continued checking daily out of fear, until the losses became too steep. By early May, his retirement accounts had fallen 25% in five months.

Mr. McLeod hopes the U.S. isn’t headed for a repeat of the “stagflation” of the 1970s. “When you’re banking on that money saved over your lifetime to carry you through and it starts to go away, you feel helpless,” he said. “I don’t want to go back to work at 66.”

Susan Wagner, a recent retiree who moved from Chicago to New Mexico’s Rio Rancho with her wife in 2020, took their retirement money out of the markets altogether this month.

“The anxiety was literally me losing sleep, tossing and turning at night wondering how much more we were going to lose,” Ms. Wagner said. Her wife, a former radiologist, was hesitant but eventually agreed. “It was too nerve-racking, and I was quite emotional about it,” Ms. Wagner said. “I was very upset by what was happening.”

Jim Cahn, chief investment officer of Wealth Enhancement Group in Minneapolis, said his clients are more nervous now than in 2008, the year of the financial crisis. The question he’s getting: “Where can I go to stop getting poorer?”

The firm held webinars for clients in the market’s frothiest days last year, warning against loading up on tech stocks and highflying pandemic names such as Peloton, Mr. Cahn said. Lately the webinars have a different theme: Don’t panic.

The firm is looking at commodities, which tend to protect against inflation and are getting a boost from the war in Ukraine, and municipal bonds, which Mr. Cahn said are starting to look attractive.

Technology shares that soared in recent years, like Facebook parent Meta Platforms Inc. and Netflix Inc., have been hit especially hard. Dismaying results or darkening outlooks have cratered tech stocks and, at painful moments, helped pull down the broader market.

There have been so many bad days they’ve started to blur together, said Sonu Kalra, portfolio manager of Fidelity Investments’s Blue Chip Growth Fund.

Mr. Kalra was sitting in his suburban Boston home office in early February when Meta shocked Wall Street with disappointing earnings. As he watched its shares slide in after-hours trading, he felt angry at himself for failing to heed earlier warning signs.

“You feel a lot of pain and start questioning: ‘What could I have done differently?’ ” he said. “But you can’t cry over spilled milk. You have to move forward.”

At the time, he thought Meta’s issues were idiosyncratic and not a sign of a broad withdrawal from growth stocks. That came later, when Russia’s invasion of Ukraine sent energy prices higher. “Oil permeates everything,” he said.

On Wednesday, Cole Smead, a portfolio manager at Smead Capital Management Inc., woke up early in Phoenix. Target, whose stock makes up about 5% of the Smead Value Fund, was set to report earnings. Target stock was down double digits in premarket trading. Mr. Smead put on a suit and headed in to his office.

That morning, Target hovered at 25% below Tuesday’s close. Mr. Smead decided it wasn’t productive to stare at a screen and watch his fifth-largest position in freefall. He picked up a book, the biography of George Hearst, the silver miner father of William Randolph Hearst.

“I figured he’ll probably teach me more than the markets will teach me that day,” he said.

Conventional investing wisdom says that over time, stock markets go up. Countless investors watched their savings grow by staying put in a market that rose sharply in the decade after the financial crisis. Those who held tight when the market crashed in early 2020 were rewarded when stocks resumed their upward climb within weeks.

To some market players, this year’s decline feels different. The government’s extraordinary stimulus measures that pushed the economy into a V-shaped recovery in 2020 have largely run out, replaced by policies aimed at controlling inflation.

While the debate about whether a recession is on the way is far from settled, there is broad consensus the U.S. has entered a period of slower growth.

Mr. McCaffrey, the 80-year-old retired research scientist, has been buying Apple shares in recent weeks, automating the purchases for when the price is below a certain level. But overall, watching shares of his favored tech companies erode has been a gloomy experience. Apple is down 23% so far this year.

“It’s getting worse for people in my age group,” Mr. McCaffrey said, “simply because we don’t have time to wait for it to come back.”

It takes a lot to shake Kevin Landis, a fund manager whose tech-focused fund was battered by the tech wreckage of the early 2000s. But when Netflix announced disappointing quarterly results in April, Mr. Landis, sitting in his home office overlooking his tranquil suburban San Jose backyard, felt as if he’d been hit by an earthquake.

Mr. Landis had reason to be concerned: Roku, another streaming company, made up 14% of his tech fund at the end of March. He says he hasn’t sold any shares, even though Roku’s stock has sunk by nearly 60% this year.

“Probably the defining difference this time is last time I could just storm out of the office and go home,” he said. “This time, I’m working from home. So there’s no escaping it.”

Updated: 6-7-2022

Target Tries To Save Itself By Putting Everything On Sale

The retailer is caught in the crossfire between inflation and a sudden inventory glut.

Andrea Felstead writes that the retailer has cut its outlook yet again, due to “a glut of inventory” and “a rapid shift away from pandemic purchasing patterns.” Target’s home page this afternoon tells the grim tale:

That is a total of eight “% off” mentions and six “deals” that aren’t to be missed. The story here is in some ways pretty simple: Retailers spent the entirety of 2021 looking at empty shelves, wondering whether any of their L.O.L. Surprise! Doll orders would actually make it out of the shipping container nightmare alive.

So they got a little impatient and just started to place other orders — Barbie Zoologists!? — hoping something, anything would arrive.

So now these stores are swimming in a sea of mediocre merchandise just as Jamie Dimon’s contested “economic hurricane” approaches landfall. Target is choosing to clear its racks through sales in the hope it can acquire new inventory that customers actually want to buy. It’s a gamble that just might pay off.

Target’s Oversupply Problem Should Scare All Retailers

The retailer is known as one of America’s best-run stores. But lately it keeps missing the mark on what consumers want.

Target Corp. is off target again.

Just three weeks after a profit warning that saw its shares plunge the most since 1987, the big-box operator has cut its outlook again, as it seeks to address a glut of inventory amid a rapid shift away from pandemic purchasing patterns.

The company now expects a second-quarter operating margin of about 2%, compared with its previous guidance of a wide range around the first quarter’s 5.3%. Even if the margin recovers to 6% in the second half of the year, as the company expects, that puts the full-year guidance of an operating margin around 6% in peril.

The shares fell as much as 7.8% on Tuesday morning before recovering slightly.

Too much stuff in stores and warehouses is an industry-wide problem, with retailers from Walmart Inc. to Gap Inc. and Macy’s Inc. suffering from a combination of late orders, changing consumer tastes and inflation, which increases the value of the stock on their balance sheets.

Target has taken the decision to aggressively clear excess inventory and preserve the appeal of its stores to consumers. Nobody wants to shop in cluttered, unattractive shops, particularly when there are so many alternatives, including online. Rather than mothball stock, as some rivals are doing, it is trying to quickly get rid of unwanted products.

The hope is that additional markdowns and cancelling orders will lance the boil. That would put Target in better shape for the second half of the year, which includes important events such as the back-to-school shopping season, Halloween and the winter holidays.

That’s commendable, but risky.

Demand may not be sufficient to mop up the excess stock, given that consumers are being forced to spend more on essentials and so have less left over for the things they simply want. Target said it continued to expect full-year revenue growth in the low to mid-single-digit percentage range.

More worrying is that retailers are approaching the point when they must place orders for the holiday season. Target said it was working with suppliers to shorten lead times.

Even so, judging the shape of holiday demand will be particularly challenging this year, given the uncertainties around what types of products consumers will be buying, and whether spending power will be constricted by rising food and fuel prices, as well as savings being depleted by a summer of renewed travel.

Ordering too much could make the inventory glut worse, but being too conservative could mean missing out in the crucial shopping period.

Target is one of America’s best-run retailers, and over-buying for this spring summer season was quite a strategic misstep. The company would be wise to err on the side of caution.

Updated: 6-8-2022

Target CEO Says Unloading Excess Inventory Is A Necessary Pain

Brian Cornell’s decision to shed excess goods quickly is the latest abrupt strategy shift for the CEO.

Target Corp. Chief Executive Brian Cornell made a decision this week that followed a familiar pattern in his career: an abrupt shift that was second-guessed by some investors.

He hopes it pays off in the long run, the way similar moves have in the past.

Mr. Cornell, who joined Target as CEO in 2014, surprised some investors on Tuesday when he said the retailer would report lower profits this quarter because it will move to quickly shed excess inventory due to shifting buying patterns.

The news came less than three weeks after Target reported lower-than-expected profits, in part due to the cost of managing bloated inventory. Now the company will quickly cancel orders or sell products at a discount during the current quarter, eating further into profits, Mr. Cornell said.

Other retailers with too much inventory on hand—including Walmart Inc., Macy’s Inc. and Gap Inc.—have said they would discount some items and hold on to others to sell at a seasonally appropriate moment.

“We have to be decisive and get out in front of this to make sure this doesn’t linger through the back half of the year,” Mr. Cornell said in an interview earlier this week. Target’s stock sank 7% when the market opened Tuesday, then recovered some value throughout the day, eventually closing down 2.3%.

During its annual shareholder meeting Wednesday, Target executives were asked why the company cut profit forecasts so quickly after its earnings announcement.

“While we’ve continued to see strong traffic and sales growth since we reported our first-quarter results we’ve watched as many competitors have reported elevated inventory levels,” said Michael Fiddelke, Target’s chief financial officer. “As such we announced yesterday that we are taking a number of actions to further right-size our inventory.”

Target shares rose slightly on Wednesday to close at $156.70.

Target’s announcement isn’t out of character for Mr. Cornell. The 63-year-old executive joined Target after leadership stints at PepsiCo Inc. and Sam’s Club. When Mr. Cornell took the helm at Target, the retailer had struggled with a long streak of weak sales, in part due to a data breach that eroded trust with some shoppers.

Mr. Cornell soon decided the company should exit all stores in Canada, scrapping an international expansion that had already cost it $4 billion. That strategy differed from some competitors such as Walmart and Costco Wholesale Corp., which had already opened stores in multiple countries outside the U.S. Target, Mr. Cornell said, would narrow its focus on the U.S., where it would concentrate on a handful of categories such as baby, fashion and e-commerce.

“This difficult decision in Canada allows us to focus all of our energy on strengthening and executing our plans in the U.S.,” Mr. Cornell said on a conference call at the time. Target’s shares closed 1.8% higher that day.

Sales improved in some quarters, though overall the chain still lagged behind some peers. Among the problems, Mr. Cornell determined: Prices were too high, and stores needed remodels.

So in February 2017, on the day Target announced weak holiday sales, Mr. Cornell outlined a comeback plan for the U.S. business at an analyst meeting in New York. Target, he said, would spend billions of dollars to refurbish stores, use stores as e-commerce hubs, introduce better store brands and cut prices.

Updated: 7-4-2022

Glut of Goods At Target, Walmart Is A Boon For Liquidators And Bargain Hunters

Donna Griffin said she is seeing a lot of furniture and mattresses as well as winter clothing at the Bargain Hunt store near her Cropwell, Ala., home.

The 61-year-old retiree said she recently bought several women’s coats on clearance for $2.75 apiece, down from a regular price of $100. “The prices are even lower than usual because the items are out-of-season,” she said.

“There is more excess merchandise now than at any time in the past two decades.”  said CEO, Brady Churches,  Home Buys, a Columbus, Ohio, off-price retailer.

Off-price chains are awash in appliances, apparel and outdoor furniture that never made it to stores.

The excess inventory piling up at large retailers such as Target Corp. and Walmart Inc. is proving a boon for liquidators and other companies that help dispose of the oversupply.

Liquidity Services Inc., Xcess Limited, B-Stock LLC and other companies said they are seeing a glut of kitchen appliances, televisions, outdoor furniture and apparel that major chains are trying to clear out.

In many cases, the liquidators are picking up pallets at the ports or from a warehouse without the goods ever hitting store shelves and are selling the items to smaller retailers and individuals who resell them online.

“What’s unusual is the large retailers may not ever touch the products,” said JD Daunt, chief commercial officer of Liquidity Services, which operates online marketplaces. “They are asking us to get in front of this earlier than in the past. There is an unusual amount of excess inventory, and it’s affecting so many retailers at the same time.”

At the onset of the Covid-19 pandemic when many stores were temporarily closed, retailers canceled orders from overseas suppliers as shoppers huddled at home.

Then, as the economy started to open up, supply-chain bottlenecks due to factory backlogs and shipping and port delays left retailers with a dearth of goods to sell. To compensate, they ordered extra and placed those orders further in advance to ensure that products arrived on time.

“They wanted to make sure they’d have stuff to stock on the shelves,” said Marcus Shen, chief executive of B-Stock, a software company that helps retailers manage excess inventory by matching sellers with buyers. “In the time it took for that product to get here, demand shifted.”

Consumers curtailed purchases of the comfortable clothes and home items that they bought during the height of the pandemic and shifted more spending to dressier clothes as well as travel and entertainment.

At the same time, inflation is pushing up the costs of necessities such as food and gas, leaving less money for discretionary items.

The mismatch between supply and demand has left large chains such as Target, Walmart, Gap Inc. and Macy’s Inc. with excess goods they need to clear out.

Target warned in June that profits would be hurt as it cancels orders with vendors and offers discounts to get rid of excess merchandise.

Home Buys, a Columbus, Ohio, off-price retailer with eight stores, is selling name-brand washers and dryers at 40% off the regular price.

“Before Covid, we wouldn’t have had washers and dryers in our stores,” said Brady Churches, the chain’s chief executive. “The market for those items is normally tight, and there isn’t a lot of excess.”

Mr. Churches said there is more excess merchandise now than at any time in the past two decades. He has been scooping up lawn-and-garden furniture and apparel, particularly winter sweaters and other cold-weather gear that arrived too late for the selling season. “The secondary market is swimming in apparel,” he said.

Norm Rankin, senior vice president of merchandising for Bargain Hunt, a closeout chain based in Nashville, Tenn., with 85 stores, said he has been negotiating with a large retailer trying to unload $30 million of Christmas goods, including artificial trees, decorations and home décor, that arrived after last year’s holiday season.

“The quality is very high, because many of the goods didn’t even make their way into retailers’ warehouses,” Mr. Rankin said.

Even though the secondary market is overloaded with excess outdoor furniture, Mr. Rankin said he isn’t buying more because the season to sell those items is almost over. “We don’t want to be overstocked ourselves,” he said.

Larger discount chains like TJX Cos.’ T.J. Maxx and Ross Stores Inc. also are benefiting from the oversupply. They often buy overruns directly from manufacturers, whereas the liquidators scoop up excess supply from the largest retailers and resell the goods to smaller chains, mom-and-pop shops, online-auction sites and individuals, who resell them at flea markets and websites such as Amazon.com Inc., eBay Inc. and Craigslist, industry executives said.

Jason Carrick, the owner of Xcess Limited, said the summer is typically a slow time for liquidations, but not this year.

His company has been carting away 1,600 truckloads a month of excess merchandise from a large online retailer, including clothing, treadmills and videogame consoles. Xcess Limited recently took 150 truckloads of Easter and spring goods off the hands of another large chain.

Updated: 12-29-2022

After $18 Trillion Rout, Global Stocks Face More Hurdles In 2023

* Recession, Rate Hikes Risk Spurring Earnings Slowdown In 2023
* Question Marks Remain Over How Big Tech And China Will Fare

More tech tantrums. China’s Covid surge. And above all, no central banks riding to the rescue if things go wrong. Reeling from a record $18 trillion wipeout, global stocks must surmount all these hurdles and more if they are to escape a second straight year in the red.

With a drop of more than 20% in 2022, the MSCI All-Country World Index is on track for its worst performance since the 2008 crisis, as jumbo interest rate hikes by the Federal Reserve more than doubled 10-year Treasury yields — the rate underpinning global capital costs.

Bulls looking ahead at 2023 might take solace in the fact that two consecutive down years are rare for major equity markets — the S&P 500 index has fallen for two straight years on just four occasions since 1928. The scary thing though, is that when they do occur, drops in the second year tend to be deeper than in the first.

Here Are Some Factors That Could Determine How 2023 Shapes Up For Global Equity Markets:

Central Banks

Optimists may point out that the rate-hiking peak is on the horizon, possibly in March, with money markets expecting the Fed to switch into rate-cutting mode by the end of 2023. A Bloomberg News survey found 71% of top global investors expect equities to rise in 2023.

Vincent Mortier, chief investment officer at Amundi, Europe’s largest money manager, recommends defensive positioning for investors going into the New Year. He expects a bumpy ride in 2023 but reckons “a Fed pivot in the first part of the year could trigger interesting entry points.”

But after a year that blindsided the investment community’s best and brightest, many are bracing for further reversals.

One risk is that inflation stays too high for policymakers’ comfort and rate cuts don’t materialize. A Bloomberg Economics model shows a 100% probability of recession starting by August, yet it looks unlikely central banks will rush in with policy easing when faced with cracks in the economy, a strategy they deployed repeatedly in the past decade.

“Policymakers, at least in the U.S. and Europe, now appear resigned to weaker economic growth in 2023,” Deutsche Bank Private Bank’s global chief investment officer Christian Nolting told clients in a note. Recessions might be short but “will not be painless,” he warned.

Big Tech Troubles

A big unknown is how tech mega-caps fare, following a 35% slump for the Nasdaq 100 in 2022. Companies such as Meta Platforms Inc. and Tesla Inc. have shed some two-thirds of their value, while losses at Amazon.com Inc. and Netflix Inc. neared or exceeded 50%.

Expensively-valued tech stocks do suffer more when interest rates rise. But other trends that supported tech’s advance in recent years may also go into reverse — economic recession risks hitting iPhone demand while a slump in online advertising could drag on Meta and Alphabet Inc.

In Bloomberg’s annual survey, only about half the respondents said they would buy the sector — selectively.

“Some of the tech names will come back as they have done a great job convincing customers to use them, like Amazon, but others will probably never reach that peak as people have moved on,” Kim Forrest, chief investment officer at Bokeh Capital Partners, told Bloomberg Television.

Earnings Recession

Previously resilient corporate profits are widely expected to crumble in 2023, as pressure builds on margins and consumer demand weakens.

“The final chapter to this bear market is all about the path of earnings estimates, which are far too high,” according to Morgan Stanley’s Mike Wilson, a Wall Street bear who predicts earnings of $180 per share in 2023 for the S&P 500, versus analysts’ expectations of $231.

The upcoming earnings recession may rival 2008, and markets are yet to price it in, he said.

Delicate China

Beijing’s early-December decision to dismantle stringent Covid curbs seemed like a turning point for MSCI’s China Index, whose 24% drop was a major contributor to global equity market losses in 2022.

But a month-long rally in mainland and Hong Kong shares has petered out as a surge in Covid-19 infections threatens economic recovery. Many nations are now demanding Covid testing for travelers from China, a negative for global travel, leisure and luxury stocks.

Options Boom

Technicals are increasingly driving day-to-day equity moves, with the S&P 500 witnessing below-average stock turnover in 2022, but explosive growth in very short-term options trading.

Professional traders and algorithmic-powered institutions have piled into such options, which were until recently dominated by small-time investors. That can make for bumpier markets, causing sudden volatility outbreaks such as the big intraday swing after October’s hot US inflation print.

Finally, with the S&P 500 failing to break out from its 2022 downtrend, short-term speculation remains skewed to the downside. But should the market turn, it will add fuel to the rebound.

Updated: 12-30-2022

‘Everything Bubble’ Bursts: Worst Year For US Stocks And Bonds Since 1932

While the crypto markets have taken a bashing in 2022, it hasn’t exactly been rosy for US stocks, bonds and real estate either.

It’s been a torrid year for investors, and not just those in crypto, with United States (U.S.) bonds experiencing their worst year in centuries and U.S. stocks pulling back nearly 20% since 2022 began.

As of Nov. 30, a Financial Times report noted that a traditional portfolio consisting of 60% stocks and 40% bonds will have seen its worst performance since 1932, when the U.S. was in the midst of the Great Depression.

Meanwhile, tech stocks, which some theorize have a correlation with cryptocurrency prices, haven’t had a great year either.

An index tracking the performance of U.S. companies in the industry recorded a loss of 35.76% for the year.

Household tech giants such as Netflix, Meta, Zoom, Spotify and Tesla have all had particularly difficult years as well with their share prices falling in the range of 51% and 70%, according to Yahoo Finance.

Even the “safe as houses” real estate sector has started to show signs of pain, with the most recent data from the Federal Housing Finance Agency showing that U.S. house prices were stagnant through September and October.

These stock and sector declines may help put the current crypto winter into better perspective, noting that total crypto market cap fell from $2.25 trillion to $798 billion throughout the year, representing a drop of 64.5%, and crypto billionaires recorded huge losses.

Some of the crypto crises that have occurred throughout 2022 include the bankruptcies of FTX, Celsius and Three Arrows Capital, as well as the collapse of the Terra network, among others.

According to a Dec. 30 tweet by investment analyst Andreas Steno, “every single asset class” is down significantly in 2022, and real estate is soon to follow.

Every single liquid asset class is down A LOT this year and yet I keep hearing that Real Estate will whether the storm OK

No it will not.. It just lags.

— AndreasStenoLarsen (@AndreasSteno) December 29, 2022

Updated: 12-31-2022

Treasuries Post Biggest Annual Loss Ever As Inflation Takes Toll

* US Bond Market Index Fell 12.5%, Most In Its History
* Yields Rose Through Much Of 2022, But Ended Below Their Highs

The US Treasury market notched a record annual loss in 2022, fueled by inflation pressures that prompted the Federal Reserve to hike its overnight benchmark by more than four percentage points.

Yields peaked in October or November, then retreated as inflation gauges began to show moderation and Fed officials slowed the pace of policy tightening. The yield curve inverted, with rates for 5-year notes first exceeding those for 30-year securities in March, while the gap between two- and 10-year yields also flipped.

Ultimately, these inversions reached historic extremes, signifying that investors expect high short-term yields to do economic damage. The inversion of the two- to 10-year curve hit as much as 85.2 basis points on Dec. 7, before ending the year at around 56 basis points. The five-year premium over the 30-year rate at one point reached as much as 46.8 basis points.

For 2023, many US interest-rate strategists expect Treasuries will extend their recent rally, dragging yields lower and steepening the curve in the second half of the year so long as labor-market conditions soften and inflation ebbs further.

The Bloomberg US Treasury Index returned -12.5%, its second straight full-year loss and the biggest in its four-decade history; the worst months for the index were in September (-3.45%), March (-3.11%) and April (-3.10%); the 1Q loss of 5.58% was the biggest on record for a single quarter

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