Victoria’s Secret stumbled out of the gate this year. But its performance wasn’t as bad as Wall Street expected.
Sales at Victoria’s Secret stores open at least a year fell 7% during the first quarter of 2019 compared with a year earlier, parent company L Brands (LB) reported on Wednesday.
L Brands also owns Bath & Body Works. Sales at that chain’s stores open at least a year rose 7% last quarter compared with a year earlier.
Wall Street expected an even steeper decline at Victoria’s Secret. L Brands profit last quarter also beat investors’ predictions, driving its stock up close to 14% in after-hours trading. Heading into earnings, L Brands’ stock had fallen 33% over the past year.
Despite the better-than-expected quarter, Victoria’s Secret is still struggling with many women. Other retailers, including Target (TGT), have capitalized on the brand’s struggles by introducing new lingerie lines.
On Wednesday, Target executives said its lingerie brands saw “significant strength” last quarter. Kohl’s (KSS) also said its lingerie business grew last quarter.
US stocks retreated today, although the trade war didn’t appear to be the catalyst for a change. Instead, blame a plunge in oil prices, a federal court ruling and more wreckage in the retail world.
The energy sector was the biggest loser. US oil prices dropped nearly 3% to $61.42 a barrel on surprise increase in stockpiles. Halliburton (HAL), Hess (HES) and Devon Energy (DVN) declined more than 3% apiece.
Qualcomm (QCOM) tumbled 11% after a judge ruled the company’s pricing strategy violates antitrust law.
Lowe’s (LOW) plummeted 13% after slashing its outlook and posting disappointing results. Nordstrom (JWN) declined 9% on poor results and a gloomy outlook.
Target (TGT) surged 8% after revealing a healthy sales increase.
At least a few officials at the Federal Reserve are likely breathing a sigh of relief about the recent tumble on Wall Street.
Prior to the trade war fears returning to the stock market, “a couple of” Fed officials expressed concern about excessive valuations in financial markets, according to minutes released on Wednesday from the central bank’s meeting that ended on May 1.
Those Fed members felt that “asset valuations in some markets appeared high, relative to fundamentals,” the minutes said.
In other words, euphoria was getting ahead of reality. The fear is that greed gets out of hand, creating an unsustainable bubble like the dotcom mania.
The minutes added that staff members at the Fed found that “valuation pressures” in stocks and corporate debt markets increased “significantly this year, though not quite to the elevated levels” of most of 2018.
The Nasdaq has spiked 17% so far this year. However, the stock market has cooled off since that last Fed meeting. Trade fears sent stocks plunging earlier this month. The S&P 500 is sitting about 3% below its all-time high.
Given the trade war uncertainty and minimal inflation, the Fed is content keeping rates where they are for now.
“Participants generally agreed that a patient approach….remained appropriate,” the Fed minutes said.
An investment fund is determined to give female founders an opportunity to succeed.
Anu Duggal, founding partner of Female Founders Fund said on CNN Business’ “Markets Now” live show that she believes women’s health, and consumerization of health care are areas that are important to women but have received little funding so far
“Women control $2 trillion of spend,” she noted. “Whether it’s fertility or menopause, that’s an industry we want to invest in.”
She also said women tend to be more environmentally conscious, so her fund is investing in companies that want to leave less of a footprint for consumers.
Duggal said she was ecstatic that three companies with female founders have crossed the billion-dollar valuation threshold this year: Rent the Runway, Glossier and Away.
An ETF with a ticker “YOLO” believes it’s the best way to invest in the cannabis industry.
Unlike other broad industry ETFs, YOLO is actively managed
“There are some companies I want to avoid. But as an active portfolio manager, I decide which companies I want to overweight or underweight,” said Dan Ahrens, portfolio manager of AdvisorShares’ Pure Cannabis ETF, on CNN Business’ “Markets Now” live show Wednesday.
He said he tries to make the fund low-turnover, but it tries to act very quickly when it sees action on the horizon. For example, it got out of a company called Insys Theraputics, which afterward said it may go bankrupt.
So why “YOLO?”
The Fed has said it will hold on rates this year, but investors are starting to think there’s a chance it will cut them.
“[Federal Reserve Chairman Jerome Powell] said maybe there’s a chance for a rate cut, so we’ll have to wait and see,” said Alan Valdes, partner at Wall Street Capital Partners, on CNN Business’ Markets Now live show Wednesday.
“I don’t think he’s going to cut rates. I think we’re in a good spot now. But with the trade war, anything is possible.”
Is that trade war going to hurt the economy?
Political turmoil over Brexit has sent the pound plummeting close to its lowest level this year.
Sterling dropped as much as 0.65% against the US dollar on Wednesday to just above $1.26 before recovering slightly.
The currency has shed about 2.8% this month, and is on track for a record 13 straight days of declines against the euro, according to analysts.
The fall comes as Britain once again faces the prospect of a messy exit from the European Union.
Markets are still reacting negatively to the US-China trade war.
The Dow 30 is a mix of reds and greens. The top gainer is 3M (MMM), up 1.7% and the biggest loser is Apple (AAPL), which is down 1.7%.
Target (TGT) is rallying 9% on strong sales growth, Urban Outfitters (URBN) is declining 8% after a mixed earnings report.
Qualcomm (QCOM) is still sinking and is down 10% after a federal judge ruled that the company illegally charges sky-high prices to license its technology.
Trouble is brewing for Luckin Coffee (LK).
The stock is down nearly 9% to $15.85 per share, meaning it’s trading below the $17 per share it debuted at last week.
Luckin Coffee has quickly taken China by storm since opening in 2017. The chain has nearly 2,400 stores in 28 cities. That makes it second only to Starbucks (SBUX) in China.
Luckin joins Lyft (LYFT) and Uber (UBER) as a highly anticipated IPO that has underwhelmed investors.
Urban Outfitters (URBN) beat on earnings, but its same-store sales are flat … and its CEO thinks he knows why.
Richard Hayne said on the earnings call late Tuesday that last year’s sales were higher because the shopper was on a “sugar high from the tax rebates.”
He said the trend in store visits will continue to decline, despite last year’s blip spurred by the Trump administration’s tax cuts:
The stock is down 6% in early trading and has fallen 25% this year.
The Boston Federal Reserve thinks we’re going to be alright. Eric Rosengren, president of the Boston Fed, told CNN’s Julia Chatterley that he predicts the US-China trade war “doesn’t have a large impact on my forecast on the economy.”
“Both countries do have a strong incentive to try to get to an agreement,” said Rosengren. He said that the longer the trade war goes on, the more the potential impact it will have on the economy. “There’s a lot of uncertainty and uncertainty’s bad for the US economy as well.”
But beyond tariffs, the economy is “pretty strong,” he said. The unemployment rate is down to 3.6%, the lowest it’s been since 1969, when the United Sttes was sending its first man to the moon.
Still, there are conflicting signals with the inflation rate still slightly lower than forecasts of 2.1%.
“I would say the Fed reserve has been missing pretty persistently on those two percent inflation targets,” Rosengren said. But he believes that if wages continue to rise as they have been, inflation will also rise to match up with the Fed’s goals.
Once the Fed hits its inflation target, it’ll have a little more room to maneuver in the event of another recession.
If markets dip very low, Rosengren said the Fed will lend a helping hand: “We will react if it’s a very negative shock and we should, because that would be an indication that the economy would slow down.”
Treasury Secretary Steven Mnuchin said the Trump administration has spoken with Walmart’s chief financial officer and other major retailers as he monitors the impact of prices on every day consumer goods as a tit-for-tat trade war escalates with China.
At a House Financial Services Committee hearing, Mnuchin said he is “carefully monitoring” the impact on prices, and so far he doesn’t expect there will be “significant costs” to the American consumer.
He said he doesn’t “necessarily agree” that consumer goods prices will climb due to the tariffs on Chinese imports.
Mnuchin said he has recently spoken with the chief financial officer of Walmart (WMT) – and does so on a regular basis – on what consumer products could be possibly sourced from other countries other than China to reduce the impact on consumers.
Worries about the US-China trade war continue to weigh on Wall Street.
The modest losses come after the Dow soared nearly 200 points on Tuesday.
Qualcomm (QCOM) tumbled 9% after a federal judge ruled the company illegally charges sky-high prices to license its technology.
Retailers continue to experience explosive moves. Lowe’s plunged 9% on an earnings miss and dimmed outlook, while Nordstrom dropped 8% on its own gloomy results and lowered forecast. Target, on the other hand, soared 7% on strong sales growth.
Sprint and T-Mobile slumped after Reuters reported that the Justice Department’s antitrust staff has recommended suing to block the deal.
It has taken almost a full year, but investors are beginning to believe that the trade war is here to stay.
President Trump is dug in, happy with his strategy and laying the groundwork for more tariffs on Chinese goods.
And from the sound of it, President Xi is dug in, too. He told a domestic audience, “Now there is a new long march, and we should make a new start,” with his chief trade negotiator Liu He at his side.
Morgan Stanley (MS) this week said the “window for resolution is narrowing,” and predicted only four weeks left before significant financial damage creeps into the global economy.
On Wall Street, investors are still enjoying stock market gains for the year and the major averages are higher than where they were when the trade war started.
On Main Street, consumer inflation remains muted and companies have either absorbed the hit from tariffs or carefully spread them out among products.
No question the risk for consumers and investors is higher today than it was even a few weeks ago.
Avon (AVP) shares spiked 17% in premarket trading after a report that the makeup company is nearing a sale.
The Wall Street Journal reports that Avon is close to selling itself to Natura & Co., a Brazilian-based rival.
Terms of the acquisition “couldn’t immediately be learned,” the paper said, but said it’s expected to be finalized Wednesday.
Avon has been dealing with declining sales in recent years after its door-to-door sales model has fallen out of favor.
Americans may have slowed their shopping at Kohl’s and Nordstrom during the start of 2019, but they flooded into Target.
Sales at Target (TGT) stores open at least a year rose 4.8% during the first quarter of 2019 compared with the same period a year earlier. Target’s digital sales grew 42% during the quarter, too.
Both of those metrics from Target beat rival Walmart (WMT), which also had a strong start to the year. Target said it gained market share during the quarter, which may have come at the expense of struggling department stores and ailing retailers.
Target’s stock jumped around 8% during premarket trading on the sales and profit beat.
“Over the last two years we have made important investments,” in remodeling stores and offering new ways to buy online, CEO Brian Cornell said in prepared remarks.
This year, Cornell said Target will “extend the reach” of same-day buying options as retail’s delivery wars escalate. It also plans to introduce new brands, remodel old stores and open new small stores in cities.
Lowe’s (LOW) shares sank 10% in premarket trading following a mixed earnings report, which included a weaker-than-expected outlook.
The home improvement retailer’s revenue and same-store sales for the first quarter came in above analyst expectations, but its earnings per share was slightly below predictions.
For fiscal 2019, the company reduced its earnings per share guidance range to $5.45 to $5.65. It was previously expected to earn between $6.00 to $6.10 per share.
The company cited higher costs that hit margins.
CEO Marvin Ellison said its sales is a “clear indication that the consumer is healthy,” but said the company had several “unanticipated” problems, which led it to cut its guidance.
Qualcomm (QCOM) shares are sinking 9% in pre-market trading after a federal judge said the company illegally charged companies sky-high prices to license its technology.
The company is the world’s largest maker of smartphone modems and microchips.
In a case brought to court in 2017 by the US Federal Trade Commission, District Court Judge Lucy Koh said Qualcomm should not receive a percentage of sales of each phone a company sells; instead, it should receive a much smaller amount based on what Qualcomm technology exists inside the phone. It also must license its patents to rival chipmakers.
Qualcomm is expected to appeal the decision. The company did not immediately respond to a request for comment.
Shares in Chinese surveillance company Hikvision plunged on Wednesday following a report that the Trump administration is considering banning it from buying US goods.
Hikvision stock plummeted the daily limit of 10% during early morning trading in Shenzhen. It recovered some of those losses to close about 6% lower.
The move would be Washington’s latest attempt to curb Beijing’s tech ambitions, and a further escalation of the US-China trade war as talks have stalled.
Hikvision manufactures surveillance cameras and security products powered by artificial intelligence. It’s faced international criticism for surveillance operations in Tibet and Xinjiang.
The Federal Reserve will release minutes from its meeting on April 30 and May 1 today at 2 p.m. ET.
At the meeting, central bankers led by Chair Jerome Powell left the Fed’s key benchmark rate unchanged, sticking with the wait-and-see approach outlined earlier this year amid uncertainty about where the US economy is headed.
Investors will scrutinize the minutes for signs of the Fed’s commitment to the status quo.
The meeting took place before new rounds of tit-for-tat tariffs reignited the trade war between the US and China, threatening global economic growth.
