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Late Summer Period of Reflection; FL Beats, DE Mixed

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Friday, August 19, 2022

As we exit the most consequential period of summer earnings season — jobs numbers, inflation, housing and earnings reports for the marquee names on the S&P 500 have all been heard from over the past few weeks — we enter the quietest period of trading this side of Christmas Week. We are thankful for such a time, as it gives us a moment to pause and look back on what’s transpired thus far in 2022.

For instance, although all major indices are still down big year-to-date — from -7% on the Dow to -18% on the Nasdaq — we’re actually positive on two of the four over the past six months: the Dow and the small-cap Russell 2000 are both up slightly more than +1%, with the S&P 500 basically flat (-0.5%). Only the tech-heavy Nasdaq, which had gotten the biggest bid in the stellar trading year that was 2021, is still down -3% from February.

Market futures are selling off somewhat in Friday’s pre-market on basically no news, unless you count Ryan Cohen selling all his Bed Bath & Beyond (BBBY - Free Report) shares (sending that meme stock hurtling downward though still well off the sub-$5 per share trough we saw in early July). The run-up off the mid-June bottom has been impressive and efficient, although the muscle memory of sending indices too high too soon like we did back in the first trading days of the year is likely still fresh in many investors’ minds.

For the past week, we’ve been in pretty much a holding pattern, even though intra-day highs and lows demonstrated a bit more volatility than the closing numbers would indicate. We are seeing signs across a widening spectrum of the economy that inflation is pulling back notably, but there is still a long way to go until the Fed funds rate at all resembles the current rate of inflation. Everyone agrees the Fed has a rendezvous with 3%; the only question is whether we touch it in September or the Fed leaves a little more slack.

Next week’s summit in Jackson Hole will bring plenty of analysis based on public statements from Fed Chair Jay Powell and others. The Fed has taken plenty of lumps over its monetary policy decisions over the past year, but the fact of the matter is: they’re not sunk yet. Despite a first-half ’22 negative GDP, which unofficially touched off a recession, a still-strong labor force and supply chain improvements have our current economy resembling something better than recessionary strife.

Foot Locker (FL - Free Report) shares are up big on the company’s Q2 earnings report ahead of Friday’s opening bell, with a big beat on the bottom line — earnings of $1.10 per share versus 75 cents in the Zacks consensus, for a positive surprise of +46.7% — on revenues of $2.07 billion, which topped estimates by +0.62%. Comps were -10.3% year over year, but 2021 was a record year for the company. Shares are way up on the report, which marks Foot Locker’s ninth-straight beat, though still below the early-year levels, before the stock plummeted on Q4 earnings back in February. For more on FL’s earnings, click here.

Deere & Co. (DE - Free Report) also posted earnings this morning, though its results were mixed: earnings of $6.16 per share missed the Zacks consensus by -7.23% (though up nicely from $5.32 per share a year ago) on $13 billion in quarterly sales, marking a +0.76% positive surprise. This breaks an 11-quarter streak of earnings beats for the farm machinery major, which is trading down more than -4% in today’s early session. Shares are still positive year to date. For more on DE’s earnings, click here.

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