Stock Markets Face Challenges before Fed's Busy Week: Daily Stock Update
In the coming week, a host of major retailers, including Target and Walmart, will release their second-quarter earnings reports. This announcement comes at a time when the economic landscape is shrouded in uncertainty, with the Federal Reserve (Fed) preparing to release the minutes from its July meeting on Wednesday.
The anticipation surrounding Target's earnings is particularly high, following a downgrade by bank analyst Robert Ohmes of BofA Securities. Ohmes downgraded Target from Neutral to Underperform, citing several reasons such as slowing digital sales growth, a lack of scale in digital advertising and third-party marketplace, elevated tariff, pricing, and merchandising headwinds, and increasing competitive threats from Walmart and Amazon.com.
Despite Ohmes' pessimistic outlook, most of Wall Street remains on the sidelines when it comes to Target, with a consensus Hold recommendation. Seven analysts tracked by S&P Global Market Intelligence rate Target as a Strong Buy, three have it at Buy, 23 call it a Hold, and four rate it a Sell.
On the other hand, UBS Global Research analyst Michael Lasser expects Walmart's earnings report to show "underlying momentum remains strong." Lasser has a Buy rating on Walmart and believes its current valuation is justified due to its "unique opportunity for significant margin expansion" and the "consistency and visibility of its business." Walmart is currently trading at 38.5 times forward earnings.
The July jobs report came in lower than expected, raising concerns about the state of the economy. However, Federal Reserve Chair Jerome Powell will speak at the Jackson Hole Economic Symposium on Friday, which could provide some insight into the Fed's future monetary policy decisions.
Expectations for a quarter-point rate cut at the next Fed meeting in September have been boosted, with CME FedWatch showing futures traders are pricing in an 83% chance of a 25-basis-point cut. This potential rate cut could have significant implications for the retail sector, as lower interest rates often encourage consumer spending.
Meanwhile, Novo Nordisk (NVO) gained 3.7% after the company's obesity drug, Wegovy, was granted accelerated approval from the Food and Drug Administration (FDA) to treat adults with metabolic dysfunction-associated steatohepatitis (MASH). BMO Capital Markets analyst Evan David Seigerman views Novo Nordisk as a show-me story into the back half of the year.
As the retail sector prepares to unveil its earnings, investors will be closely watching these developments to gain a clearer picture of the economic outlook and the performance of these major players.
Read also:
- Railway line in Bavaria threatened by unstable slope - extensive construction site at risk
- Wind Farm Controversy on the Boundary of Laois and Kilkenny
- Delaware's contentious offshore wind project faces uncertainty as the Trump administration reverses course on clean energy initiatives.
- Massachusetts' sports betting income surged by 34% year-on-year in April
