Dow Jones Rallies 0.7% as Walmart, Home Depot Earning Lift Retail Sector

Key Points

• Wall Street was mixed on Tuesday, with the Dow gaining, Nasdaq 100 falling and S&P 500 remains broadly flat.
• Retail stocks got a lift from much better-than-expected earnings Walmart and Home Depot.
• Big tech/growth names fell on a rise in US bond yields.

Wall Street Mixed as Retailers Rally on Strong Earnings, Growth Stocks Fall Amid Yield Rally

US equity markets were mixed on Tuesday, as strong earnings from heavyweight retailers and better-than-expected US Industrial Production growth in July lifted stocks that are sensitive to perceptions about the health of the US economy, but a subsequent rise in US bond yields hit rate-sensitive big tech/growth names. The end result was that the Nasdaq 100 index was last down about 0.3%, after hitting fresh multi-month highs above 13,700 earlier in the session, but the Dow Jones was last up about 0.7%, after hitting its highest levels since mid-April in the 34,200s.

The S&P 500 index was last changing hands close to flat on the day near the 4,300, after also hitting its highest levels since mid-April at 4,325 earlier in the session, before finding resistance at its 200-Day Moving Average at 4,326. The last time the benchmark US index hit its 200DMA was back on 21 April and, at current levels, the S&P 500 is trading around 18% higher versus its annual lows in the 3,600s posted back in June.

Earnings that have held up better than expected, as most recent demonstrated by Walmart and Home Depot, evidence that the US is holding up better than expected in the face of extreme price pressures and evidence that this year’s inflation surge has peaked and should now ease have all contributed to the recent run higher. In short, optimism has grown that the US economy might be able to achieve a so-called soft-landing, where the Fed is able to bring inflation back under control without having to raise interest rates excessively high and risking a recession.

Walmart Jumps 5.5%, Home Depot Leaps 4.1%

The share prices of two of the largest US retailers, Walmart and Home Depot, both jumped on Tuesday after both posted better-than-expected earnings results prior to the open of US trade. Walmart’s downwards revision to its new full-year profit forecast wasn’t as bad as expected, with the company having issued a profit warning only a few weeks ago. Meanwhile, Home Depot beat top-line earnings estimates despite falling store footfall amid higher prices.

Walmart and Home Depot’s solid earnings helped the likes of Lowe’s, Target and TJX Companies and Kroger all also post solid intra-day gains. That helped to lift the S&P 500 GICS Consumer Staples and Consumer Discretionary sectors, which were the best performers after gaining 1.2% and 0.9% respectively. The underperforming sectors were Information Technology (-0.6%), Communication Services (-0.3%), Health Care (-0.4%), Energy (-0.4%) and Real Estate (-0.5%).

In terms of some of the big names, Microsoft, Alphabet and Apple were down 0.5%, while Tesla dropped closer to 1.0%. Amazon nearly gained 1.0%, lifted amid the upbeat tone to the retail sector.