U.S. stocks were edging higher early Monday morning hours before the opening bell on Wall Street as another busy week of earnings reports for retailers was about to kick off.
Among the two dozen or so big-name retailers set to report quarterly earnings were Costco, Best Buy, Macy’s, Nordstrom, Gap and AutoZone.
There will be a lot of attention on the group, especially after disappointing numbers and forecasts from the likes of Walmart, Target and Ross Stores.Retail stocks got pummeled last week as inflation eroded profit margins and slammed consumers, with many cutting back on discretionary and big-ticket items just to make ends meet.
Target, whose shares plunged 25% Wednesday in the worst day since the crash of 1987, noted purchases of big TVs and appliances that consumers loaded up on during the pandemic have tailed off, which doesn’t bode well for Best Buy when it reports on Tuesday.
Investors were awaiting minutes from the latest policy setting meeting of the Federal Reserve and updates on consumer prices, due later this week.
On Friday the S&P 500 dipped more than 20% below its peak set early this year before buying late in the day gave it a tiny gain. It finished 18.7% below its record. That capped a seventh straight losing week, the longest since 2001, when the dot-com bubble was deflating.
Inflation and rising interest rates, the war in Ukraine, and China’s slowing economy are all punishing stocks and raising fears about a possible U.S. recession.
Many big tech stocks, seen as some of the most vulnerable to rising interest rates, have already fallen much more than 20% this year. That includes a 37.2% tumble for Tesla and a 69.1% nosedive for Netflix.
It’s a sharp turnaround from the powerful run Wall Street enjoyed after emerging from its last bear market in early 2020, at the start of the pandemic.
With inflation at its highest level in four decades, the Fed has switched from keeping interest rates super-low to support markets and the economy and is raising rates and making other moves to tamp down inflation. The worry is it might go too far or too quickly.
Goldman Sachs economists recently put the probabilty of a U.S. recession in the next two years at 35%.
Inflation has been painfully high for months. But the market’s worries swung higher after Russia’s invasion of Ukraine sent prices spiraling further at grocery stores and gasoline pumps, because the region is a major source of energy and grains.
Adding pressure onto stocks are signs corporate profits are slowing and finally may be suffering from inflation.
Meanwhile, shares were mostly higher in Asia in cautious trading after Wall Street rumbled to the edge of a bear market on Friday.
Tokyo and Sydney were higher Monday while Hong Kong and Shanghai were unchanged.
The Nikkei 225 in Tokyo gained 1% to 27,001.52.South Korea’s Kospi was up 0.3%, at 2,647.38.
Australia’s S&P/ASX 200 edged 0.1% higher to 7,148.90.