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State of the consumer

Are U.S. consumers finally tightening the purse strings? That's the main question on the minds of investors as major retailers kick off their quarterly earnings reports this week, starting with Home Depot (HD). The home improvement chain's Q1 results came in below Street expectations, hurt by a delayed start to spring, continued softness in certain larger discretionary projects, and higher mortgage rates.

Dig deeper: Retailer earnings come at a time when consumer sentiment is weakening, amid expectations of stickier inflation for some time to come and a tempered outlook for income growth. Investing Group Leader Bret Jensen believes stagflation is an increasingly likely economic scenario. "Right now, I believe the average American consumer has a better handle on the U.S. economy than the average investor and a better take on the true level of inflation than governmental statistics."

Scott Feiler, consumer sector specialist at Goldman Sachs, said the consumer spending concerns have been driven by updates by bellwethers in the sector, and the notable slowdown seen in April - one of the worst months of the retail quarter. Companies like Wayfair (W) and Whirlpool (WHR) have already warned that consumers are cutting back spending on big-ticket items, while fast-food chains such as McDonald's (MCD) and Starbucks (SBUX) have observed pickier and more value-minded customers. "Consumer cracks are emerging," especially among lower incomes, warned Bank of America analyst Savita Subramanian.

Earnings watch: Walmart (WMT), which will report Q1 results on Thursday, is expected to report modest upside to the consensus U.S. comparable sales estimates, driven by bargain-hunting shoppers. Also keep an eye on other retailers scheduled to report results next week: Lowe's (LOW), Target (TGT), TJX (TJX), and Ross Stores (ROST).

Sustained weight loss

Patients who are taking Novo Nordisk's (NVO) blockbuster obesity drug Wegovy have reportedly maintained an average of 10% weight loss four years after starting the treatment. "We see that once the majority of the weight loss is accrued, you don't go back and start to increase weight if you stay on the drug," said Martin Holst Lange, Novo's head of development. The data could help Novo in its efforts to convince insurers and governments to provide coverage for the treatment. The U.K.'s National Health Service provides only two years of Wegovy coverage, while Medicare does not cover the drug. A recent poll showed that many people believe Medicare should cover weight loss drugs. (2 comments)

Resisting takeover

Anglo American (OTCQX:AAUKF) has unveiled a major shakeup of the company - which includes divesting its steelmaking coal and nickel businesses - as the British miner aims to stave off BHP's (BHP) takeover bid. Anglo American will demerge Anglo American Platinum (OTCPK:ANGPY), while its diamond business De Beers will either be divested or demerged "to improve strategic flexibility." The overhaul is aimed at sharpening Anglo American's focus on its mainstay assets - copper and premium iron ore. "These actions represent the most radical changes to Anglo American in decades," its CEO Duncan Wanblad said. The plan was announced just a day after the firm rejected BHP's (BHPnew £34B proposal.

Power grid boost

The Federal Energy Regulatory Commission approved two new rules Monday that are expected to make it easier to expand the construction of big power lines and bring more renewable energy to U.S. homes and businesses. One rule will require companies that produce and transmit electricity to weigh factors such as supply and demand over at least 20 years; the other addresses the permitting of critical projects in areas that lack adequate transmission capacity. The rule requiring long-term planning is "the biggest single action by the federal government to advance transmission," according to Rob Gramlich, president of power consulting firm Grid Strategies. (46 comments)

Today's Markets

In Asia, Japan +0.5%. Hong Kong -0.2%. China -0.1%. India +0.5%.
In Europe, at midday, London +0.1%. Paris -0.1%. Frankfurt -0.2%.
Futures at 7:00, Dow flat. S&P -0.1%. Nasdaq -0.1%. Crude flat at $79.10. Gold +0.3% to $2,349.10. Bitcoin -1.5% to $61,690.
Ten-year Treasury Yield unchanged at 4.48%.

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:30 Producer Price Index
9:10 Fed’s Cook Speech
10:00 Jerome Powell Speech
8:15 PM Fed's Schmid Speech

Companies reporting earnings today »

What else is happening...

WSB survey results: Derisking and diversifying is still the way to go.

Biden administration raises tariffs steeply on Chinese EVs, chips.

Uber (UBER), Lyft (LYFT) face landmark trial on rideshare drivers.

BYD (OTCPK:BYDDF) sends shockwaves across auto with Seagull.

Biden faces mounting calls to take on grocery price-fixing issue.

HubSpot (HUBS) rises on report of 'compelling' offer from Alphabet.

Wedbush: Apple (AAPL)-OpenAI pact appears to be done deal.

OpenAI unveils new flagship model GPT-4o, available for free to all.

OPEC risks losing market share if it does not start raising output.

ZIM (ZIM) surges as container shipping stocks' momentum continues.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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