Pre-market stocks: Retailers have just sounded the alarm on inflation. It is worth paying attention to
What’s happening: Inflation is already pushing consumers to cut spending on certain items as they seek to cut spending, a shift that will have major implications for the next phase of the US recovery after the pandemic, revealed the main chains of the country.
This left him with too much inventory of certain products, especially for kitchen appliances, televisions and outdoor furniture. Its shares plunged 25% on Wednesday, their worst day since 1987.
Shoppers are concerned about “the persistently high inflation they are experiencing, particularly in food and energy,” Target CEO Brian Cornell said on a conference call with analysts, though he emphasized that consumers remain “resilient” and continue to benefit – save money and get excited about seeing friends and family again.
Traffic to stores remains robust, growing nearly 4% year-on-year, and May is off to a good start, he added.
But analysts poring over the results said they represented a step change from the post-Covid lockdown boom era.
Bursting with stimulus checks and cash they had stashed away while at home, Americans spent with abandon. Now, as bills rise, anxiety is forcing many households to be much more cautious – and stores have been caught off guard.
“Few companies are as intertwined with so many aspects of the American economy as [Walmart] and [Target]and their logistics and supply chain operations rival or exceed those of most other companies,” Bespoke Investment Group said in a note to clients. the environment, who isn’t?
R5 Capital’s Scott Mushkin said after Target earnings that he now sees the retail environment as uninvestable, at least in the short term.
“Inflation and costs are out of control, consumer spending is swinging wildly, and, at least in our minds, fear is growing about how long consumer spending can last,” he wrote in a research note.
Target’s share price drop on Wednesday seems to indicate that investors are bracing for “the idea that this shoe is likely to go down.”
“It leaves us wondering if the unprecedented boom of the last two years will be followed by an unprecedented collapse, the magnitude of which we cannot even imagine,” Mushkin said.
Controversial hedge fund Melvin Capital closes
When an army of day traders coordinating on Reddit set their sights on GameStop stocks early last year, many hoped to punish one man: Melvin Capital’s Gabe Plotkin.
The hedge fund had made a bet that shares of GameStop would fall. He was beaten when the stock soared around 1,700% in a single month.
In a letter to investors seen by Reuters, he said the past 17 months had been “an incredibly trying time”.
Melvin Capital had $12.5 billion in assets at the start of 2021 and was considered one of the best performing hedge funds on Wall Street. Then his fortunes changed.
The company had $7.8 billion in assets at the end of April. It has lost 23% in the first four months of 2022, a person familiar with the fund’s finances told Reuters.
Plotkin said Wednesday that it has begun the process of exiting positions and will stop charging management fees in early June. He added that he had “given everything” he could, but it still wasn’t enough to provide the feedback customers expected.
Overview: The closing of Melvin Capital is a stunning fall from grace. It shows the lasting effects not only of the stock frenzy even last year, which shocked many traditional investors, but also of the profound implications of this year’s volatility, such as fears over inflation, interest rates interest, China’s response to the pandemic and the war in Ukraine leave investors with few places to hide.
Musk rages as Tesla gets S&P’s ESG Index boot
“ESG is a scam,” he tweeted. “He has been weaponized by fake social justice warriors.”
Take a step back: S&P Dow Jones Indices said in a blog post that Tesla’s ESG stance has been hurt by allegations of racial discrimination and poor working conditions at its Fremont manufacturing plant.
The automaker’s handling of a National Highway Traffic Safety Administration investigation into fatal crashes involving its autopilot technology has also come into question.
“While Tesla may be playing its part in taking gas-powered cars off the road, it has lagged behind its peers when examined through a broader ESG lens,” wrote Margaret Dorn, Head of ESG Indexes. for North America. blog post.
Index makers have jumped on the ESG investing frenzy to create a series of new products they can market to clients who want to better align their portfolios with their values. But many made up the rules as they went along. Oversight by regulators remains weak.
Also today :
- The first unemployment claims in the United States for the past week arrive at 8:30 a.m. ET.
- US Existing Home Sales for the April release at 10 a.m. ET.