The S&P 500 index slipped 1.2% last week amid mixed earnings from retailers while rate worries also ramped up ahead of a gathering of central bank officials being held next week in Jackson Hole, Wyo.
The index is still up 2.4% for the month of August so far but still solidly in the red for 2022 with a year-to-date decline of 11%.
The slight decline came as investors tried to make sense of retail earnings and FOMC minutes released last week.
Among the retail reports, Walmart (WMT) reported fiscal Q2 results above analysts’ expectations and boosted its earnings guidance for fiscal 2023 as the retailer benefited from higher prices, supply chain cost reductions and consumer shopping sprees.
Target (TGT), however, reported a larger-than-expected drop in its fiscal Q2 earnings as actions taken to manage inventory levels drove margin pressure, although the retailer still maintained its full-year revenue expectations. Kohl’s (KSS), meanwhile, not only reported lower-than-expected fiscal Q2 results but also slashed its full-year outlook as high inflation is expected to further hurt demand.
Investors parsed central bank officials’ comments ahead of the Jackson Hole meeting next week. On Thursday, Federal Reserve Bank of St. Louis President James Bullard said he would “lean toward” a rate increase of 75 basis points at next month’s Federal Open Market Committee meeting. Minutes released last week from the July meeting of the Federal Reserve’s monetary policy-setting committee also showed the committee’s members anticipated “significant policy tightening” in their upcoming meetings to combat inflation.
By sector, communication services led to the downside with a 3.3% weekly drop, followed by a 2.4% decline in materials. Other decliners included real estate, financials, technology, consumer discretionary, industrials and health care.
Still, three sectors climbed on the week. Consumer staples had the largest percentage increase of the week, up 1.9%, followed by a 1.2% rise in utilities and a 1% gain in energy.
Companies expected to release quarterly earnings results this week include Intuit (INTU), Medtronic (MDT), J.M. Smucker (SJM), NVIDIA (NVDA), Salesforce (CRM), Dollar General (DG) and Dollar Tree (DLTR).
The market will get readings earlier in the week on US manufacturing and services sector activity for August as well as new and pending home sales for July, but July inflation numbers to be released on Friday are likely to receive the most attention.
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