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Macy's, Lowe's Beat in Q4; Durable Goods Lower

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Tuesday, February 27th, 2024

Pre-market futures are tepid for a second-straight trading day — even going back to last week, after last Thursday’s big upswing in market activity began leveling off slightly. We continue that leveling off as of this hour today, with the Dow -25 points, the S&P 500 +1 points and the Nasdaq +22. We have some grist for the trading mill ahead of the opening bell, but it’s not likely to cause any meaningful tremors from this vantage point.

While not as essential to the Fed’s outlook on interest rates as Personal Consumption Expenditures (PCE) out Thursday morning, today’s preliminary Durable Goods Orders for January do give a snapshot of the economy, particularly in the field of enterprise investment. Headline came in at -6.1%, lower than the -5.0% expected and the downwardly revised -0.3% for December. This represents the biggest drop since April 2020, the heart of the Covid pandemic, but remember this is a preliminary read, almost certainly prone to revision in the next couple months.

Subtracting volatile Transportation costs, -0.3% comes in lower than the downwardly revised -0.1% the prior month, and equals the lowest monthly print since October of last year. Non-defense, ex-aircraft — which is a proxy for “normal” business expenses — was positive: +0.1%, as expected and in-line with the previous month. Shipments posted their best month in a year at +0.8%, while Orders were down. These numbers help further depict an overall cooling of the general economy as of a month ago.

Department store giant Macy’s (M - Free Report) reported Q4 results this morning, coming out ahead of earlier Zacks consensus on both top and bottom lines: earnings of $2.45 per share outpaced the $2.02 expected on $8.12 billion in quarterly sales, which narrowly beat the $8.09 billion analysts had been looking for. Same-store sales dropped -4.2% year over year, but this outperformed expectations. Shares are down marginally on the news.

New CEO Tony Spring has also announced a new growth strategy for the Zacks Rank #3 (Hold)-rated big-box retailer. Another 150 closings for Macy’s department stores will bring the overall total to 350; however, the company plans to bring 45 new Bloomingdale’s and Blue Mercury stores, the latter of which has produced 12 straight quarters of strong growth. The present year’s revenue guidance is slightly below where this fiscal year’s totals came in; this gives the company some room to raise as the year goes on (in theory).

Lowe’s (LOW - Free Report) also put our Q4 numbers this morning, beating expectations on both top and bottom lines — earnings of $1.77 per share on quarterly sales of $18.60 billion surpassed the $1.66 per share and $18.34 billion anticipated — and keeping intact a string of positive earnings surprises going back nearly five years. However, the company warned that consumers are not buying home improvement materials at optimal rates, as high mortgage costs are keeping many Americans out of the home-buying market.

A half-hour ahead of the opening bell, Case-Shiller Home Prices came in slightly higher than expected for December: +6.1% year over year versus +6.0% expected and +5.4% in November, +0.2% month over month for the 11th straight month higher (seven straight, year over year) on the 20-city survey. The leading cities in home price growth are: San Diego +8.8%, a tie between Detroit and Los Angeles at +8.3%, and Chicago +8.1%. This survey, while a month in arrears from most monthly economic reports, is considered the most accurate print for the housing market.

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