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Mixed Markets on Lower New Home Sales; Nordstrom Beats

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Ahead of the opening bell today, we discussed whether the markets were being subjected to the “whipsaw” again today, with the Dow sinking more than -500 points at session lows and the Nasdaq was -4%. Well, the whipsaw came, but — on the the Dow, at least — it went away by the session close: the Dow was +0.15% at the bell, the S&P 500 was -0.80%. The Nasdaq rebounded but still came in -270 points or -2.35%, and the small-cap Russell 2000 was -1.35%.

One of the metrics we’ve been paying close attention to last week and this is in home sales, and today’s New Home Sales for April came out much lower than expected: 591K from the downwardly revised 709K (March had originally reported 763K, so this is a big drop). This amounts to a -16.6% month over month slide, sending inventories leaping to 9-month supply levels. Year over year, New Home Prices are -26.9%.

While this is not a good development for home developers — Toll Brothers (TOL - Free Report) , for instance, was down -4.4% today — it does infer downward pressure on asking prices, which is a good development for bringing down inflation levels overall. The median price for a newly built home jumped +20% from a year ago to $450,600. This compares with last week’s Existing Home Sales median price of $391,200, +15% year over year. We’ll start looking for these figures to reverse over the next few monthly prints.

PMI Manufacturing and Services for May both came in lower month over month, but nothing earth-crushing: +57.5 on Manufacturing is down from the 59.2 reported in April; Services reached 53.5, notably lower than the 55.6 from a month ago. Yet all these data points are well north of 50, which demarcates growth from contraction. Some roll-off here may also be construed as somewhat good news as well — on the goods-producing side, at least, as it would indicate higher inventories may draw down.

We’ve also talked at length about difficulties in the Retail space during this Q1 earnings season, but one company that looks to have put together a splendid plan is Nordstrom (JWN - Free Report) , which posted positive surprises on both top and bottom lines after the closing bell: -$0.06 per share was 2 cents better than the Zacks consensus, and a big improvement from the year-ago’s Covid-ravaged quarter of -64 cents per share; sales came in at $3.57 billion — easily surpassing the $3.33 billion analysts were expecting and representing +19% growth on the top line year over year.

Nordstrom also upped its guidance range for full-year earnings to $3.20-3.50 per share; the Zacks consensus had been for $3.30. The company cited higher pricing power and lower markdown rates in the quarter, and the words “supply chain productivity” sound like music to a retail investor’s ears. Improvements are moving toward pre-pandemic levels for Nordstrom. Late trading had sent shares +19% on the news, but have come back a bit since for the Zacks Rank #2 (Buy)-rated stock.

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