Stocks Mixed, Walmart, Home Depot, Housing Starts and Elon Musk In Focus – Five Things To Know

Stock futures mixed with retail earnings in focus; Walmart shares gain on Paramount streaming deal ahead of Q2 profits; Home Depot shares active ahead of Q2 earnings, new Saudi investment; Housing starts set to show decline in single-family builds and Elon Musk gets partial win in latest Twitter takeover skirmish.

Here are five things you must know for Tuesday, August 16:

1. — Stock Futures Mixed With Retail Earnings In Focus

U.S. equity futures were little-changed Tuesday, while the dollar hit a one-week high against its global peers in safe-haven trading and Treasury bond yields moved lower, as investors adopted a cautious stance ahead of retail earnings and sales data slated for the next two sessions.

A solid run of weekly gains for U.S. stocks, the best since November of last year, was extended yesterday as investors shrugged-off weak China data and slumping oil prices to add around 0.3% to the S&P 500 by the close of the session.

China’s stumbling growth, linked in part to its ‘zero Covid’ health policies, is clipping commodity prices in markets around the world and triggering a mini-rally for the dollar, which rose to a one-week high of 106.609 against its global peers in overnight trading.

Here at home, second quarter earnings from Walmart  (WMT) – Get Walmart Inc. Report and Home  (HD) – Get Home Depot Inc. (The) Report Depot will arrive before the bell, as well a key reading of July housing starts that follows a slump in homebuilders’ confidence reported last night by the National Association of Home Builders.  

The data is unlikely to shake confidence in the broader economy, however, with the Atlanta Fed’s GDPNow forecasting tool showing thrid quarter growth advancing at a 2.5% clip following stronger-than-expected July jobs data and still-expanding manufacturing activity. 

Inflation concerns, however, remain at the forefront, particularly with minutes of the Fed’s July policy meeting due for release on Wednesday, as bets on a 75 basis point rate hike — the third in succession — hold at 40.5% heading into the Fed’s September decision.

In other markets, oil prices extended declines in overnight trading, pulling U.S. crude to around $88 per barrel, following Sunday’s disappointing industrial output data from China and a ramp-up in U.S. production that has domestic output pegged at around 12.2 million barrels per day.

WTI crude futures for September delivery were marked $1.41 lower at $88.00 per barrel while Brent contracts for October, the global benchmark, fell $1.71 to $93.39 per barrel.

Benchmark 10-year Treasury note yields fell 3 basis points in overnight trading to 2.797% while 2-year notes were 5 basis points lower at 3.201%.

In overseas markets, Europe’s Stoxx 600 added 0.14% in early Frankfurt trading while overnight in Asia the region-wide MCSI ex-Japan index fell 0.07%.

On Wall Street, futures tied to the S&P 500 are indicating a modest 4 point opening bell dip while those liked to the Dow Jones Industrial Average are priced for a 15 point bump. Futures linked to the tech-focused Nasdaq are indicating a 23 point decline.

2. — Walmart Shares Gain On Paramount Streaming Deal Ahead of Q2 Profits 

Walmart  (WMT) – Get Walmart Inc. Report shares moved higher in pre-market trading ahead of the retail giant’s second quarter earnings and news of a streaming media deal with Paramount Global  (PARA) – Get Paramount Global Report

Walmart cautioned late last month that “increasing levels of food and fuel inflation are affecting how customers spend”, adding that while inflation is likely to support the dollar value of sales between now and the end of the year, shoppers are spending less on discretionary items such as clothing and shoes.

That likely means second quarter sales growth of around 7.5% from last years levels, Walmart said, but an 8% to 9% slide in adjusted earnings as margins compress and the retailer moves to shift its bloated first half inventories with deeper price cuts.

Analysts are looking for an adjusted bottom line of $1.62 per share, a 9% decline from last year’s levels, on revenues of around $150.8 billion. U.S. same store sales are forecast to rise 4%.

Walmart also completed a deal with Paramount to give Walmart+ members access to the media group’s “essential” streaming plan, and ad-based subscription that typically costs $4.99 per month. Walmart+ costs $12.95 per month. 

Walmart shares were marked 1.18% higher in pre-market trading to indicate an opening bell price of $134.16 each.

3. — Home Depot Shares Active Ahead of Q2 Earnings, New Saudi Investment 

Home Depot  (HD) – Get Home Depot Inc. (The) Report shares edged lower in pre-market trading ahead of the group’s second quarter earnings prior to the opening bell and news that Saudi Arabia’s sovereign wealth fund has taken a stake in the do-it-yourself retailing giant.

Home Depot is expected to post a bottom line of $4.94 per share for the three months ending in August, a 9% gain from the same period last year, on overall revenues of $43.36 billion. 

Looking into the 2022 fiscal year, which ends next January, Home Depot said it sees ‘mid single digit’ earnings growth, up from its prior forecast of ‘low single digit’ gains, and comparable sales growth of around 3%.

Late Monday, Securities and Exchange Commission filings revealed that Saudi Arabia’s powerful sovereign wealth fund has amassed a 1.6 million share stake in the group. 

Home Depot shares were marked 0.2% lower in pre-market trading to indicate an opening bell price of $314.00 each.

4. — Housing Starts Set To Show Decline in Single-Family Builds 

A weakening housing market, hit by a lack of new home supply, surging prices and escalating mortgage rates, is likely to find investors focus Tuesday with housing starts and building permit data prior to the start of trading.

Mortgage rates have risen by around 3.5% so far this year, taking the average cost of a 30-year fixed to 5.47% last week, according to data from the Mortgage Bankers’ Association. That’s taken an axe to housing affordability, particularly given the pressures buyer’s are facing as a result of the fastest consumer price inflation in forty years, and could glut the market with existing home sales as sellers look to ‘cash out’ in the final throes of housing long-term gains.

Economists are looking for July housing starts to fall to an annual rate of around around 1.53 million, after hitting a nine-month low of 1.559 million in June, with single family home starts falling below the 1 million mark for the first time in more than two years. Permits for new home construction easing to an annual rate of 1.65 million.

5. — Elon Musk Gets Partial Win In Latest Twitter Takeover Skirmish 

Tesla  (TSLA) – Get Tesla Inc. Report CEO Elon Musk won a small concession from Delaware Chancellor Kathaleen McCormick late Monday in his ongoing battle to walk away from a $44 billion takeover of Twitter  (TWTR) – Get Twitter Inc. Report.

Chancellor Kathaleen McCormick granted Musk and his legal team the right to review documents collated by Kayvon Beykpour, a former Twitter executive tasked with calculating the number of fake of “bot” accounts on the social media platform. Beykpour left the company earlier this year, shortly after Musk unveiled his intention to buy Twitter for $54.20 per share. 

McCormick, however, denied Musk’s request to see documents connected to 21 other Twitter employees as the two sides prepare for an October hearing on the disputed takeover. 

Musk has been locked in public dispute with Twitter since early July over “bot” accounts, which he says constitute a material change to the merger terms he agreed in the spring.

Twitter, for its part, is suing Musk to force him to purchase the group for $44 billion, arguing in court papers published last month that the idea of a “billionaire founder of multiple companies, advised by Wall Street bankers and lawyers” was “hoodwinked into signing a $44 billion merger agreement” is “as implausible and contrary to fact as it sounds”.

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