The markets continue to mark time and the Dow is stuck in a trading range with 25,200 on the low end and 26,600 on the high end. The big issue keeping stocks range bound is China. The trade negotiations, while they are ongoing, have become more complicated thanks to the 5G battle between China’s Huawei, which wants to be the global 5G king, and a coalition of nations led by the US that seek to thwart this from happening due to security concerns stemming from Huawei’s checkered past, tactics and its suspected ties to the Chinese Communist Party.
Retailers are reporting earnings and one clear trend is that discount retailers are doing well while traditional retailers are struggling. Target Stores (discounter) reported a 5% revenue increase and a 16% jump in net profits sending shares up 9%. Nordstrom’s (traditional) also reported earnings but a 3% revenue dip and a 55% plunge in profits sent shares to a 53-week low. Kohl’s also reported disappointing numbers as did JC Penny. Meanwhile, Lowe’s Home Improvement reported a 2% revenue gain and a 3% increase in profits. Revenue beat estimates while profits fell short of expectations due to margin compression. Shares fell but the gurus said to buy the dip.
Luxury home builder DR Horton reported better than expected results with a 9% revenue gain and a 2% increase in net income. Homebuilding revenue was up 8% and homes closed was higher by 10%. While mortgage rates are falling and lumber prices are down from last year, labor and land constrains remain an issue. The company also moderated its forward guidance a bit which disappointed the analyst community. Random Lengths reported that lumber prices fell from $352 to $345 in the latest reading and noted that while demand is picking up supplies are ample.