Stock Market Update: Futures Down as Investors Mull Over Mixed Retail Earnings – TipRanks

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Stock futures were in the red early on Thursday as investors digested mixed reports from leading retailers.

Futures on the Dow Jones Industrial Average (DJIA) lost 0.56%, while those on the S&P 500 (SPX) dipped 0.61%, as of 6.26 a.m. EST, Thursday. Meanwhile, the Nasdaq 100 (NDX) futures declined 0.63%.

Retailer Bath & Body Works (NYSE:BBWI) surged more than 23% in the pre-market trading hours after handily exceeding revenue and earnings-per-share expectations. Tech stalwart Cisco (NASDAQ:CSCO) also jumped more than 3% after posting solid earnings results.

However, after posting weak sales guidance for the holiday season before the market opened on Wednesday, shares of Target (NYSE:TGT) headed downward, ending the day with losses of 13%.

Wednesday was a dull day for the stock market, with the major indexes ending the day in the red. The S&P 500, the Dow, and the Nasdaq 100 closed 0.83%, 0.12%, and 1.45% lower.

Retail Earnings Reveal Consumer Behavior Trends

Target’s guidance revealed that consumers are expected to spend less during the holiday season due to inflation and also the lurking fear of a recession. Nonetheless, other retailers including Home Depot (NYSE:HD), Lowe’s (NYSE:LOW), and Walmart (NYSE:WMT) reported better-than-expected earnings earlier this week, explaining that they are not getting hit as hard as expected from inflation.

Retail earnings are not over yet, with Macy’s (NYSE:M) and Kohl’s (NYSE:KSS) reporting before the market opens and Gap (NYSE:GPS) after the closing bell.

It is important to mention here that retail sector performance is an important gauge for the Federal Reserve to chart out its policy path. Strong earnings and guidance from retailers indicate that consumers are handling inflation well as they are continuing spending.

However, a closer look will reveal that the trend of retail performance is more important to look at. Whether luxury retailers are gaining from higher sales or more affordable brands are doing so will tell us more about consumer behavior during inflationary times. Consumers of price-inelastic consumer goods may opt for cheaper options of the same goods.

The Fed is likely to keep a track on these trends, and possibly keep hiking interest rates until spending on essentials show signs of slowing.

That said, the target inflation rate is around 3%, a far cry from the current level of 7.7%. Thus, a chance of pivot from the Fed might not be as close as investors may think.

Housing Prices Continue Downtrend

A lot is happening in the housing sector as well. It is no surprise that housing prices have fallen drastically ever since high mortgage rates finally burst the demand bubble. Recently, the Fed bank of Dallas warned that prices could fall by a further 20%. While this may pose a problem for homeowners, this might help the economy recover from inflation in the long run.

Against this backdrop, data for October’s housing starts and building permits will be out on Friday, giving us clarity on the situation of the housing market.

Interestingly, taking advantage of the low prices was JPMorgan (NYSE:JPM), which partnered with real estate investment company Haven Realty Capital to invest over $1 billion in the acquisition and development of new build-to-rent communities across the US. This will boost JPMorgan’s asset portfolio and will be of tremendous value in the long run after the housing market rebalances.

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