The Dow fell 87 points to 21,812 on lower trading volume as markets were rattled by political debate and posturing. With earnings season over with we can expect the news cycle to now drive market action.
Lowes Home Improvement reported Q2 numbers posting a 7% revenue rise and growth in bottom line of 15%. While these appear to be good they missed the guru expectations sending shares lower. Same store sales were up 4.5% and Lowes CEO Robert “Nudnick” Niblock said traffic was strong enough to warrant an increase in store hours. While this is good news to those wanting to buy a brick at 2 am it will put pressure on margins as operating costs will rise. This report, along with Home Depot’s strong earnings report from last week show a steady housing market that appears to be experiencing a slowdown in its growth rate.
According to the FDIC, second quarter bank earnings were stellar and hit a record high of $48.3 billion in profits which is up 10.7% from the same period last year. Banks in the US are sitting on excess reserves of over $2 trillion meaning they could collectively lose that money (or pay it out in one huge juicy dividend) and still be in compliance from a regulatory capital standpoint. While interest rates are on the rise, banks have yet to pass those higher rates on to depositors maybe in part because they have too much in deposits already meaning that the earnings are instead going to reserves, stock buybacks and increased dividends.