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Durable Goods Soften, Dick's Lowers Guidance

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Wednesday, May 25, 2022

After starting this trading week in the green — not without looking over our shoulder, of course: 8 straight down weeks on the Dow will have this effect — we’re giving back to the bears again this morning: the Dow is -120 points at this hour, the S&P 500 is -15 and the tech-heavy Nasdaq, as we’ve seen throughout this year so far, is -55 points.

Welcome to the worst first 100 trading days of the year since 1970 — back when Jimi Hendrix was still on tour. For the Nasdaq, it’s the worst first 100 days ever, and still down -30% from its record highs set early November of last year. This is not to say the markets can’t stage a turnaround between now and the close — the Dow swung more than 600 points from intraday lows to highs just yesterday — but we’re certainly not looking at “risk off” bullishness in today’s pre-market trading.

Durable Goods Orders for the month of April came in lower than expected: +0.4% versus +0.7% expected, and lower than the downwardly revised +0.6% reported in March. That said, we appear to be returning to general stability among durable goods reportage, as opposed to the +3.2% posted last November and the -0.7% we saw in February of this year. There’s something to be said for keeping an even keel.

Core Capital Equipment Orders also came down, this time significantly: +0.3% from the upwardly revised +1.1%, which matched the recent highs we saw in December, but still well off the +3.2% we saw for April a year ago. In any case, these metrics slowing on a month over month basis would suggest inventories are alleviating, which is good. We’re still positive for Durable Goods and “core” orders, so on a tight focus we’re calling this a “win-win.”

This afternoon, we’ll see the minutes from the last Fed meeting released: the Fed funds rate was upped 50 basis points (+0.5%) from the 0.25-0.50% range, with a program for draining the massive balance sheet beginning June 1st of $30 billion in Treasury bonds and mortgage-backed securities, to be increased to $60 billion per month as of September. What these minutes will tell us is how much push or pull there was among voting Fed members, which may indicate where we’re headed at the Fed’s June meeting.

Before the opening bell today, Dick’s Sporting Goods (DKS - Free Report) has been down -13% in the pre-market following the company’s Q1 earnings report, which typically beat expectations on both top and bottom lines: earnings of $2.85 per share outpaced the $2.43 expected, on $2.7 billion in revenues, which took out the Zacks consensus $2.62 billion, -8% year over year.

But the reason for the sell-off (aside from general bearish market conditions) is in the lowered full-year earnings guidance, which was moved to a range of $9.15-11.70 per share. The Zacks consensus had been looking for $12.52 per share, so expect plenty of downward revisions.

Same-store sales are expected to be between -8% to -2% for 2022; analysts had previously expected flat to -4%. Inventories are up +40.4% from a year ago. Even strong specialty retailers like Dick’s are feeling the brunt of Q1 economic conditions. For more on DKS’ earnings, click here.


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