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Trends & Analysis
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Costco shares slide after earnings miss
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Thor shares decline despite upbeat earnings
News
EUR/USD slides despite strong Germany data
News
Crude oil settles lower after surging past $82
News
S&P 500 declines despite upbeat NFP data
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Kroger tops Q3 views amid steady grocery demand

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Dollar Tree Shares Higher Despite Mixed Q4

The news shaping the markets today

Moody’s Credit Rating cut Russia’s long-term issuer and senior unsecured debt ratings from Baa3 to B3. However, the RUB/USD forex pair remained flat after the news.


Singapore’s IHS Markit PMI fell to a three-month low of 52.5 in February, from 54.4 in the earlier month, sending the SGD/USD pair lower in forex trading this morning.


Japan’s composite PMI fell to 45.8 in February, from 48.8 in the prior month. The recent reading signalled the second consecutive month of contraction in the country’s private sector, which exerted pressure on the JPY/USD forex pair.


China’s general services PMI declined to 50.4 in February, from 51.4 in the previous month. However, the recent reading still pointed to growth in the services activity and sent the CNY/USD pair higher in forex trading this morning.


Australia’s trade surplus widened to A$12.89 billion in January, from A$8.82 billion a month ago. Despite this being the largest trade surplus since July 2021, the AUD/USD forex par remained under pressure.

 

What’s happening: Shares of Dollar Tree rose on Wednesday, after the company reported better-than-expected earnings for its fourth quarter.

What happened: The discount store has recently been raising prices amid the sharp rise in inflation and supply chain costs.

However, Dollar Tree missed revenue estimates for the fourth quarter and issued a disappointing outlook.

How were the results: The Chesapeake, Virginia-based company reported growth in revenues for the fourth quarter, but the figure came in below market views.

  • Consolidated net sales climbed 4.6% year-over-year to $7.08 billion, missing the consensus estimate of $7.12 billion.
  • Net profits contracted 10% to $454 million in the fourth quarter.
  • Earnings came in at $2.01 per share, exceeded Street expectations of $1.77 per share.

Why it matters: Dollar Tree, like other discount stores, has been forced to raise prices and increase its focus on expensive items to deal with contracting margins.

After selling most products at $1 or less for around 35 years, Dollar Tree put an end to its original identity in November last year, as accelerating inflation and rising freight costs weighed on the company’s profit margins. The company said it had to begin selling most products at the $1.25 price point at its US stores in late February.

Although gross profits for the quarter grew 0.7% year-over-year to $2.14 billion, gross margins shrank 160 basis points to 30.2%, due to higher freight costs and recall-related markdowns. The company’s operating margins also contracted, by 190 basis points to 8.2%, with operating income declining 15.1% to $578.8 million.

“As we look at the year, we do not see things getting better in the supply chain world,” CFO Kevin Wampler said during the earnings call.

Enterprise same-store sales rose 2.5%, while same-store sales for Dollar Tree grew 3.1% and Family Dollar same-store sales rose 1.7% last quarter.

Management projected full-year sales between $27.22 billion and $27.85 billion, which came in below the previous consensus estimate of $28.04 billion. The company guided to earnings of $7.60 to $8.00 per share, versus Street expectations of $7.60 per share.

How shares responded: Dollar Tree’s shares rose 0.2% to close at $139.92 on Wednesday, following the release of quarterly results. The stock has gained around 5% over the past month.

What to watch: Investors will continue monitoring inflation levels and supply chain issues, which could impact the company’s margins and overall profits in the current quarter.

The markets today

US stocks will be in focus today ahead of a basket of economic reports from the country

 

Context: Wall Street recovered sharply on Wednesday, despite rising tensions between Russia and Ukraine.

Details: The recent surge in US stocks came despite a sharp rise in oil prices. WTI crude oil traded as high as $112.51 per barrel on Wednesday, with prices climbing past $113.3 this morning.

Fed Chair Jerome Powell testified before the Congress on Wednesday, saying that interest rate hikes could come as early as this month despite the uncertainties surrounding the Russia-Ukraine crisis. “The bottom line is we will proceed, but we will proceed carefully, as we learn more about the implications of the Ukraine war on the economy,” Powell said.

Markets remained volatile, as Russia’s forces captured the southern Ukrainian city of Kherson and surrounded Mariupol.

Investor sentiment was supported by the ADP report showing that US private companies had added 475,000 jobs in February, higher than the market expectations of 400,000 job adds.

Markets rallied on Wednesday, with almost every stock in the 30-stock Dow Jones index recording gains. Shares of Caterpillar added more than 5%, while Intel’s stock gained over 4%.

The Dow Jones jumped 596.40 points, or 1.79%, to settle at 33,891.35. The S&P 500 rose 1.86% to reach 4,386.54, while the tech-laden Nasdaq 100 climbed 1.7% to settle at 14,243.69.

What to watch: Traders await economic data on initial jobless claims and services PMI from the US. The number of people filing new claims for jobless benefits had declined by 17,000 to 232,000 in the week ended February 19 and is expected to decline further to 225,000 in the latest week. The IHS Markit US services PMI is projected to increase to 56.7 in February, from 51.2 in the prior month. The ISM services PMI is expected to rise to 61 in February, from 59.9 in January.

Other Markets: European trading indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 1.36%, 0.69%, 1.59% and 0.90%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.1101 and 1.1109 Positive
AUD/USD – 0.7287 and 0.7297 Negative
WTI Crude Oil – 112.75 and 113.72 Positive
FTSE 100 – 7,422.14 and 7,460.77 Negative
Nikkei 225 – 26,617.84 and 26,677.84 Positive

 

Market snapshot

What else to watch today

Russia’s services PMI and composite PMI, Turkey’s consumer prices, producer price inflation and gross foreign exchange reserves, South Africa’s IHS Markit PMI, Spain’s tourist arrivals, services PMI and composite PMI, Italy’s services PMI and composite PMI, France’s services PMI and composite PMI, Germany’s services PMI, composite PMI and new passenger car registrations, Eurozone’s IHS Markit services PMI, composite PMI, unemployment rate, producer prices and ECB monetary policy meeting accounts, Italy’s unemployment rate, UK’s services PMI and composite PMI, US Challenger job cuts, nonfarm unit labour cost, nonfarm labour productivity, composite PMI, factory orders and natural gas stocks change, Brazil’s manufacturing PMI, balance of trade and net payrolls, Argentina’s tax revenue, as well as Mexico’s government budget value.

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