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“You can make a lot of mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient.” – Sam Walton

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

US equity futures have reversed earlier losses and are now firmly in the red. S&P 500 futures are trading down 0.3%, and the Nasdaq is 0.5% lower. Crude oil is a big drag on equities as WTI spikes 3% to $88.70 after increased rhetoric towards Iran from President Trump. Moves in the Treasury market have also been interesting as the 10-year yield rises 6 basis points to 4.71%, erasing all of yesterday’s decline. Gold and Bitcoin had big rallies yesterday in response to the Treasury’s announcement, but this morning gold is lower while Bitcoin continues to surge, topping $71K for the first time since June.

In Asia, stocks were firmly higher with the Nikkei up 1.4%, while South Korea surged nearly 6% as memory stocks rallied. In Europe, the tone looks more like US futures as the STOXX 600 is fractionally lower on little news.

In terms of US data, the Philly Fed and Jobless Claims hit the tape at 8:30 while Leading Indicators will round out the day’s data at 10 AM. Jobless claims were mixed, with initial claims lower and continuing claims higher. The Philly Fed report, though, smashed expectations, coming in at 47.4, nearly doubling expectations.

Walmart marked the unofficial end to earnings season this morning by reporting better-than-expected earnings and sales. Despite the beat, the company lowered forward guidance, and that has the stock trading down more than 5% in early trading. With that decline, the stock is also trading below its July lows, at its lowest level since last November. WMT had been a market leader earlier this year, but after a disappointing report in May, coupled with this morning’s weakness, the stock is down more than 20% from its peak.

After last quarter’s report, WMT fell more than 7% on its earnings reaction day in what was just the seventh time since 2001 that the stock declined more than 5% on its earnings reaction day. With the stock poised to gap down more than 5% at the open this morning, it would be just the sixth time since 2001 that WMT gapped down more than 5% at the open on its earnings reaction day.

Interestingly, on all five other earnings reaction days, the stock continued lower from the open to close. Finally, with respect to WMT, if its early losses hold throughout the session today, it would be the first time since at least 2001 that the stock traded down at least 5% on back-to-back earnings reaction days.

Broadening the focus to retail in general, the sector has held up relatively well despite WMT’s weakness. The SPDR Retail ETF (XRT), which tracks the performance of retail stocks on an equal-weighted basis, is off its highs by only about 5% and closed yesterday above both its 50- and 200-day moving averages.

Not all retail-related stocks are trading equally, though. On a YTD basis, the 20 largest stocks in XRT have seen performance ranging from gains of more than 50% for stocks like Target (TGT) and Casey’s General Stores (CASY) to losses of nearly 30% for Coupang (CPNG) and Tractor Supply (TSCO). Even in the short term, six stocks are overbought while three are oversold, with the majority hanging around in neutral territory. Ironically enough, the two most overbought stocks listed below are TGT and TSCO – the best-performing stock in the group on a YTD basis and the second worst.

While such a large drop in a stock like WMT would naturally raise concerns over the consumer’s health, retail stocks have been holding up much better, even if performance has been far from uniform.

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