WMT leads US market tumble: Time to buy?
It's been a tough day for the stock market to reconcile, after back-to-back record closes for the S&P 500 index.
$Wal-Mart(WMT)$ , the scapegoat is getting much of the rap, after its disappointing guidance for current quarter, struck a chord with investors that are already nervous over the health of US consumer.
Q4 Earnings results.
Walmart actually topped earnings & revenue estimates for its fiscal Q4 2025:
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Earnings per share (EPS) : $0.66 (adjusted) vs $0.64 expected.
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Revenue: $180.55 billion vs. $180.01 billion expected.
Except for :
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Net income : $5.25 billion, a -4.37% YoY dip from $5.49 billion.
Like all US stocks’ quarterly earnings reporting, its the outlook / guidance for current quarter and fiscal year 2025 that Wall Street has issue with, once reporting company’s numbers do not match up.
Clearly, current quarter earnings report has already been priced into stock price already.
Outlook / Guidance.
Wall Street was disappointed with WMT’s conservative guidance for FY 2026:
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Q1 2026 EPS (adjusted) : forecast to be between $0.57 & $0.58, below consensus estimates.
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Full year EPS (adjusted) : forecast to be between $2.50 & $2.60 , below consensus estimates.
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Net sales : forecast to grow at a 3% to 4% rate, for (a) Q1 2026 and (b) FY 2026, below analysts' estimates of 3.7% & 4.2% growth, respectively.
Following earnings announcement, Walmart fell as much as -9.5% intraday because of valid concerns about US economy and slower growth. (see above)
Falling Walmart, kickstarted a chain-reaction that overall affected US market.
When 4pm massacre time, arrived:
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DJIA: -1.01% (-450.94 to 44,176.65).
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S&P 500: -0.43% (-26.63 to 6,117.52).
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Nasdaq: -0.47% (-93.89 to 19,962.36).
Biggest Losers of the Day.
Some of US market's biggest, recent highflyers were feeling the heat Thursday, with so-called “Momentum” stocks among the day's biggest losers.
Momentum, as name implies, is a strategy in which investors bet that recent winners will keep on winning.
The $iShares MSCI USA Momentum Factor ETF(MTUM)$ was down -1.8% in late afternoon trading. (see above)
The fund's other top holdings getting trimmed, included: (see above)
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Walmart was down -6.53% after disappointing guidance.
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$Palantir Technologies Inc.(PLTR)$ shed another -5.17%, on top of Wednesday’s -16% tumble, after news of US Defense budget downsize.
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$AppLovin Corporation(APP)$ fell -11.0%, after rising +34.0% the week before and -14% for week beginning 17 Feb 2025.
Thursday’s fall written on the wall ?
On Wednesday, options and futures contracts tied to the Cboe Volatility Index (aka the VIX) expired during the latest monthly "VIX-piration" event. (see below)
According to BTIG’s Jonathan Krinsky, like Swiss clockwork, on Thu, 20 Feb 2025, US stocks sold off, repeating a pattern that has become eerily reliable over the past year.
In that time, monthly "VIX-pirations" have frequently preceded pullbacks for the S&P 500.
This is definitely something retail investors (myself included) could learn to “watchout for” going forward !
Walmart’s faults ?
US stocks had mostly shrugged off (1) President Trump's tariff threats and (2) ongoing geopolitical drama surrounding talks with Russia to end the war in Ukraine.
Investors appeared to draw the line at disappointing earnings guidance from Walmart.
How did a downbeat profit forecast from America's biggest brick-and-mortar retailer weigh on the broader market on Thursday?
NFJ Investments, Portfolio manager, Burns McKinney believes:
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WMT is a bellwether for US consumer.
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WMT’s existing valuation is already at sky high levels.
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Any signs of cracks in the economy can be seen as catalysts for a pullback.
How many bellwether stocks are “out there” that we should look out for during each quarterly reporting season, just so we do not get caught in the line of fire ? Hm…
Is US market rally over ?
VIX flared on Thu, 20 Feb 2025 but generally has been subdued.
Even during some fairly negative action in stocks (tariff announcements, CPI etc…), VIX did not rise much.
As a result, the “spike peak” buy signal is still in place. Yay !
The trading system built around these signals calls for holding the long position for another six trading days (unless stopped out by a VIX closing above 22.51).
Currently, there is no trend of VIX signal in place at this time.
The circled area (in purple) on the VIX chart (see above) shows, VIX and its 20-day and 200-day moving averages (MA) are converged more or less together at this time.
Did Walmart’s latest earnings and the VIX’s technical analysis (TA) - point to a buying opportunity for Walmart and other stocks ? Looks like it but personally, I am still on the fence.
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Do you think knowing the VIX expiry time period is accurate to avoid a S&P slump?
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Do you think Walmart is responsible for causing US market to tumble. Surely, not right ?
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