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Consumer Confidence, Home Sales Put Damper on Rally

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One day does not a rally make, as it turns out. Investors had been looking at green indexes prior to the opening bell today, but they could not hang onto prosperity. By lunchtime, the Dow, S&P 500 and Nasdaq were all fighting to get back to breakeven. Although a late-day surge almost brought back positive closes, the Dow finished -0.24%, the S&P -0.21% and the Nasdaq -0.03%. The small-cap Russell 2000 finished -0.97% on the day.

Two economic reads this morning after regular trading commenced helped push momentum southward: Consumer Confidence for May came in at 117.2, lower than the 118.7 analysts were expecting, and down 30 basis points from the previous month’s headline. New Home Sales for April were even more disappointing: 863K, nearly 100,000 fewer sales than the estimated 959K, and below the March print of 917K.

We’re still on the road to recovery, but we are hitting some potholes. Headwinds regarding input costs for homebuilders are keeping costs high and putting a damper on what otherwise would be scorching hot business in the high-demand space. Consumer Confidence may have drifted a bit after stimulus checks came and were spent, with inflation elsewhere perceived to be taking a bite out of purchasing power. It’s the first down read in the past six months.

When it comes to the luxury housing market, however, those same concerns do not apply: Toll Brothers TOL posted a big beat on both top and bottom lines for its fiscal Q2 report after the bell Tuesday. Earnings of $1.01 per share were well above the 80 cents per share expected, and the 59 cents reported in Q2 2020. Revenues of $1.84 billion outpaced the $1.77 billion consensus. Net signed contract value and contracted homes went up 97% and 85%, respectively — both all-time highs.

Nordstrom (JWN - Free Report) posted a much bigger-than-expected miss on its fiscal Q4 bottom line this afternoon: -$1.05 per share almost doubled the -53% expected (though still a more than 50% improvement from the year-ago quarter. Current year revenue is still expected to grow 25% year over year. Digital sales tallied 46% of all company sales, and gross profits reached 32% in the quarter. Shares fell 4% on the news.

Urban Outfitters URBN, on the other hand, nearly tripled earnings expectations to 54 cents per share for its fiscal Q4, far higher than the year-ago quarter’s $1.31 per share. Revenues also came in hotter than expected: $927.4 million, easily surpassing the $897.8 million expected. Big improvements on comps were the story. Urban Outfitters’ earnings surprise was almost the mirror image of last year’s Q4 miss of 404%. Shares are up over 5% in late trading.

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