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Economic Metrics Slimmer, Walmart (WMT) Beats Estimates

Tuesday, November 17, 2020

More economic grist for the mill this morning, all of which seems to point to a slowing down of the U.S. economy as the coronavirus pandemic persists, and we get further unmoored from our congressional stimulus packages. All of today’s reads are for the month of October: Retail Sales, Import and Export Price Indexes and Industrial Production and Capacity Utilization.

Retail Sales came up short of expectations, posting +0.3% on the headline, 20 basis points behind where analysts were predicting and well off the previous month’s pace of +1.6%, which itself was downwardly revised by 30 basis points. The good news is we have now gone six straight months in positive territory on this metric. Ex-autos and ex-autos and gas numbers were both +0.2%, also a bit less than expected. Its a picture of retail moderating lower ahead of holiday shopping season, and with Covid-19 cases reaching all-time highs on a weekly basis.

Import Prices were expected to be unchanged month over month, but instead dropped 0.1%, following a downwardly revised 0.2% from September. Year over year, imports are -1.0%, a slight improvement over the previous month. Exports came in at +0.2%, also 10 basis points lower than expected. Exports also are -1.6% year over year. Keep in mind many of these sorts of metrics are comparing against U.S.-China trade war numbers a year ago, meaning we are coming in lower on already strained comps.

Industrial Production and Capacity Utilization reversed their previous month’s lower posts by reasserting their upward — but moderate — increases: Industrial Production gained 10 basis points over its estimate for last month, coming in at +1.1% and following a -0.6% for September. We had seen four positive months in a row until that month, so it’s nice to see this trajectory being re-established. Similarly, Capacity Utilization came in at 72.8%, back up from September’s dip to 71.5%. So while these numbers are overall mild, at least they’ve corrected course.

Zacks Rank #3 (Hold)-rated Walmart WMT posted a strong Q3, beating on earnings and sales: $1.34 per share compared to $1.19 in the Zacks consensus, with $134.71 billion in revenues topping estimates by 1.28%. This is Walmart’s third earnings beat in the last four quarters; the big-box giant has only missed expectations twice in the past five years. Shares are down 1.3% in the early session, however, with Q3 earnings somewhat eclipsed by Amazon’s AMZN announcement that its online pharmacy launches in the U.S. today. Walmart has still gained 27% year to date, more than double the S&P 500 over the period. For more on WMT’s earnings, click here.

We’re seeing a bit of a hangover in pre-market activity today, following Monday’s exuberance, which largely pivoted on Moderna’s MRNA great news regarding its Covid-19 vaccine candidate. Markets had been pricing in a trading existence beyond the pandemic era; this morning, early birds are second-guessing this notion a bit. The Nasdaq is up a tad, but the S&P 500 and Dow are trading lower following new all-time highs at Monday’s close.

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