Walmart and Lowe's stocks diverged after their latest earnings report but there was one shared message--there's trouble ahead from President-elect Donald Trump's proposed tariffs.
Walmart had the starker message, even as its shares gained on an improved outlook. Its CFO John David Rainey said consumers probably will face higher prices if Trump goes ahead with proposals for a 60% tax on goods from China and 10%-20% levies on all other imports.
Lowe's words were more circumspect, with the home-improvement retailer's executives noting tariffs would lift costs but also saying they were waiting to see what happens when the new administration takes office in January.
Together, the two reports are a reminder that the U.S. consumer still hasn't recovered from high inflation and the impact of higher interest rates used to wrestle it back down. Walmart said shoppers are resilient but are still spending more on food than they have historically. Lowe's said homeowners are still waiting for lower interest rates to embark on big home-improvement projects.
The chances that Trump will follow through on tariff threats in his second term look to be higher after the president-elect said he would nominate Howard Lutnick, a vocal fan of the levies, to lead the Commerce Department. UBS economists estimate that a 20% tariff on a finished consumer good would translate to an average price increase of 8%.
On balance, Trump's election win is still boosting markets, and the crucial holiday season should provide some further cheer. However, fanning inflation with tariffs could sour the mood for consumers--and the stock market.
-- Adam Clark
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Retailers Post Earnings Beats, Warn of Trade Tax Impact
Walmart and Lowe's both beat expectations and raised their full-year forecasts. Walmart got a boost from shoppers buying groceries, home goods, and toys in a sign of strength heading into the heart of the holiday season. But it also joined others warning about the potential for higher prices from tariffs.
-- Walmart reported earnings of 58 cents a share and revenue of $169.6
billion. The company said 75% of its market share gains in the quarter
were from relatively more affluent shoppers, those from households making
more than $100,000.
-- Walmart raised its full-year forecasts, to net sales of 4.8% to 5.1%, and
adjusted earnings of $2.42 to $2.47 a share. CFO John David Rainey told
CNBC that it's too soon to say what products might cost more under
President-elect Donald Trump's tariffs.
-- Lowe's third-quarter profit of $2.89 a share and revenue of $20.2 billion
both dropped from the same time a year ago. But the home improvement
retailer raised its fiscal 2024 outlook to earnings of $11.80 to $11.90 a
share, on sales of $83 billion to $83.5 billion.
-- Recovery efforts after hurricanes Helene and Milton contributed to Lowe's
quarterly sales, but the demand for home-improvement spending and
bigger-ticket discretionary projects hasn't fully recovered. Consumers
still face affordability challenges from inflation and interest rates,
Lowe's Chairman and CEO Marvin Ellison said.
What's Next: Ellison told CNBC that Lowe's is already talking to suppliers to understand the potential implications of Trump's tariffs and has been working to diversify its products and supply chain to better manage tariffs or other challenges.
-- Janet H. Cho and Sabrina Escobar
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Bitcoin Price Hits Record as Trump Euphoria Boosts Cryptos
At least one Trump trade is still sizzling. Bitcoin hit a record high overnight, as excitement about the incoming Republican administration lifts cryptocurrencies.
-- The world's largest token topped $94,000 for the first time ever,
according to FactSet data. Crypto-related stocks Coinbase Global,
MicroStrategy, and Robinhood Markets have also been climbing ever since
it became clear Donald Trump would be returning to the White House.
-- It seems like the stars are aligning for the crypto industry ahead of the
president-elect's second term in office. The Truth Social parent Trump
Media held talks to buy the digital-asset trading platform Bakkt, the
Financial Times reported. Bakkt said it wouldn't comment on market rumors
or speculation.
-- News that Trump will nominate Cantor Fitzgerald CEO Howard Lutnick as
Commerce Secretary is fueling the rally, too. Robert F. Kennedy Jr.,
another cabinet pick, said at the weekend that Bitcoin "will have no
stronger advocate" than Lutnick.
-- Tuesday also marked the first day of options trading in the iShares
Bitcoin Trust--the biggest exchange-traded fund tracking the token's
price. Calls suggest that the market is betting on further gains.
What's Next: For Bitcoin, the $100,000 milestone is now in sight. The path to six figures looks "increasingly plausible" with Trump expected to ease regulation and institutional interest soaring, XS.com analyst Antonio Di Giacomo said in a note Wednesday.
-- George Glover and Callum Keown
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Microsoft's Ignite Conference Shows AI Progress Has Slowed
Advancements in artificial intelligence models have stalled of late, leaving companies to find new applications for the current generation of AI. It's a repeating pattern since the first AI innovations back in the 1950s. Microsoft CEO Satya Nadella addressed concerns the exponential growth of AI models has begun to slow.
-- At the company's Ignite conference, Nadella laid out new features for the
company's enterprise AI platform, Microsoft 365 Copillot. But he also
talked about the concerns, acknowledging that there's a debate on whether
the industry has hit the wall with scaling laws. He called the skepticism
good for innovation.
-- For now, Microsoft's version of innovation is built on existing models
from OpenAI that have remained fairly static since 2023. Microsoft showed
off a range of new features for Microsoft 365 Copilot from new
capabilities in the Office applications to AI agents that can act
autonomously.
-- Microsoft also added a tool to analyze the return on investment from AI
spending. These are important new layers that will help Microsoft's
customers to find productive uses for the AI models it has now, though
Microsoft 365 Copilot is in its early days.
-- OpenAI's blockbuster ChatGPT in November 2022 was followed quickly by
GPT-4 in March 2023 but progress has slowed since then, and OpenAI and
others have struggled with models much larger than GPT-4. Responses are
quicker, they handle more than just text now, and researchers are trying
to lower costs.
What's Next: Advances in "intelligence" will be hugely expensive. Oracle Chairman Larry Ellison has predicted that the next generation models would cost $100 billion over four or five years. That allows companies to double down on productivity.
-- Adam Levine
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Trump Taps Lutnick for Commerce to Oversee Trade
President-elect Donald Trump wants his transition team co-chair, Howard Lutnick, to spearhead trade and tariff efforts as Commerce Secretary. Trump's vision for the role includes directly overseeing the Office of the U.S. Trade Representative, which is typically separate and reports directly to the president.
-- Lutnick, favored by tech billionaire Elon Musk for Treasury Secretary,
would as Commerce Secretary oversee major aspects of economic policy,
including the Census Bureau, and play a major role in investigating trade
practices and administering tariffs.
-- Commerce oversees the International Trade Administration, an agency in
charge of enforcing trade laws and investigating unfair trade practices.
Lutnick publicly supported Trump's campaign pledge to enact a 10% to 20%
across-the-board tariff on imports, and even higher tariffs of 60% or
more on imports from China.
-- Lutnick has called the tariffs a negotiating tool that could be used to
convince other countries to bring down their own levies or to force
companies to move production to the U.S. He has said Trump would avoid
taxes on products U.S. companies don't make.
-- Lutnick, the CEO of Wall Street firm Cantor Fitzgerald, also is an
outspoken supporter of the crypto industry, and Cantor Fitzgerald has
been a custodian for the reserves of the Tether stablecoin company.
Cantor Fitzgerald didn't respond to Barron's request for comment.
What's Next: As Commerce Secretary, Lutnick would play a role in setting policy for the digital assets industry, which crypto executives say has been unfairly targeted by the Biden administration. Trump has vowed to fire Securities and Exchange Commission Chair Gary Gensler.
-- Joe Light and Janet H. Cho
***
Merck Makes Progress on Injectible Version of Keytruda
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November 20, 2024 06:56 ET (11:56 GMT)
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