Stocks continue to show volatility which appears to have been started with a 60% drop in the price of bitcoin and rippled through equity markets. The bottom line however is the Dow continues to trade at the 34,000 level with support at the 50 day moving average. Gurus are expecting continued volatility for the next several months as inflation worries clash with an improving US economy. At today’s close the Dow was up 186 points to 34,393 on lower trading volume. For last week the Dow lost about a half a percentage point and for the year is up 12.6%. Market indicators show the rally is under pressure.
The Economy and Earnings
Home Depot posted solid earnings as the building and home remodel trend continues unabated. The company posted a 33% revenue rise and an increase in net income of 86% besting guru estimates by a fairly wide margin. It seems that positive data points in this earnings report were like a tidal wave. Same store sales were up 31%, the number of customer transactions grew 19%, gross margins came in at 34% vs estimates calling for 33%. While the company did not issue any forward guidance sell side analysts at firms like Bank of American maintained their buy ratings on the stock citing an encouraging medium term outlook.
Single family housing starts dropped more than 13% in the latest reading as roughly 15% of builders said they are putting down concrete foundations and then holding off on framing the house. Despite a shortage of housing builders said they are slowing production in order to deal with rising costs of lumber, steel, gypsum and copper. A broad mix of residential construction materials is up an aggregate 12.4% over the past 12 months and that the increase in lumber alone adds $36,000 to the cost of building a home.
With all the Federal stimulus, retail companies are reporting a spike in sales. Walmart reported numbers last week that beat both top and bottom line estimates as revenue gained 3% while net profits grew 43%. E commerce sales grew 37% and going forward the company improved its guidance from a slight decline to single digit growth.
Items of Interest
Bill passed the exam for the CFP tax module. Now he can pay his taxes!
Ford unveiled its new F-150 Lightning electric pickup. The initial reviews and stats are eye popping in terms of price and functionality. This thing has a battery the size of Texas and while preorders were robust the truck will not be available for about a year. Ford’s stock shot higher on the news but as John and I were mulling this thing over and as clients ask if they should buy Ford stock the real winner in our minds will be the electric utilities companies which are looking at the prospect of a whole new growth industry to serve that being the growing EV market. While Ford might be hot for a while what happens when the Cybertruck or the Rivian comes out or will there be cannibalization of existing F-150 sales? Only time will tell how this works out but for now it’s good to see Ford make such an electrifying move!