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Lowe’s Records Strong Q4 Results, Boosts Forecast

The news shaping the markets today

Ireland’s KBC Bank consumer sentiment index fell to 77.0 in February, from 81.9 a month ago, exerting pressure on the EUR/USD forex pair.


The Bank of Korea held its base rate at 1.25% at its latest meeting, sending the KRW/USD pair lower in forex trading this morning.


The American Petroleum Institute said that US crude stockpiles had risen by 5.983 million barrels in the week ending February 18, following a decline of 1.076 million barrels in the prior week. Despite this, WTI crude oil prices climbed this morning.


Argentina’s economic activity expanded by 9.8% year-over-year in December, versus 9.4% growth a month ago. However, the ARS/USD forex pair remained flat after the news.


Brazil’s current account deficit shrank to $8.1 billion in January, from $8.3 billion in the year-ago month, lending some support to the BRL/USD pair in forex trading this morning.

 

What’s happening: Lowe’s Companies reported upbeat results for its fourth quarter on Wednesday.

What happened: The company also raised its outlook for 2022, after grabbing market share from its bigger peer.

Lowe’s also reported a partnership with one of the leading online grocery platforms in North America to pilot same-day delivery.

How were the results: The home improvement group reported growth in sales and earnings for the three months ending January 28, with both figures topping market expectations.

  • Revenues grew 4.9% to $21.3 billion, exceeding market views of $20.31 billion.
  • Adjusted earnings surged 33.8% year-over-year to $1.78 per share, beating the Street expectations of $1.71 per share.

Why it matters: Lowe’s results followed the announcement by its larger rival, Home Depot, which also reported better-than-projected earnings for its fourth quarter on Tuesday. However, Home Depot waned of supply chain issues persisting through the year.

Both companies have benefited from increased spending on home improvement amid covid-19 restrictions. An improvement in the US housing market also boosted the sales of Lowe’s and Home Depot. There have been speculations of the overall sales of these companies being impacted by higher mortgage rates going ahead. However, Lowe’s CFO David Denton said, “We are confident that home improvement demand will remain strong despite an uptick in interest rates.”

Lowe’s comparable sales rose 5%, with comp sales in its US home improvement business growing 5.1%. Its gross profit jumped 8.8% from a year ago to $7 billion, with margins expanding by 115 basis points to 32.93% in the quarter. Home Depot had reported a margin contraction of 35 basis points.

“We delivered another year of outstanding performance in 2021, as we gained market share across DIY and Pro through our Total Home strategy,” CEO Marvin Ellison said during the earnings call. The company also announced plans to partner with Instacart to pilot same-day delivery of home improvement products.

Management projected earnings between $13.10 and $13.60 per share for 2022, higher than its earlier view of $12.25 to $13 per share. The company guided to revenues between $97 billion and $99 billion.

How shares responded: Lowe’s shares rose 0.2% to close at $215.09 on Wednesday, following the release of quarterly results. The stock has tumbled around 16% year to date.

What to watch: Investors will continue monitoring mortgage rates and supply chain issues, which might impact the company’s overall sales ahead.

The markets today

The Canadian dollar will be in focus today ahead of a basket of economic reports from the country

 

Context: The CAD/USD forex pair rose on Wednesday, with traders assessing tensions between Russia and Ukraine.

Details: The loonie was among the top performers last year but seems to have lost its positive momentum in 2022.

Markets have recently been cautious amid escalating Russia-Ukraine concerns. Traders grew more concerned with the US announcing more sanctions against Russia.

Prices of crude oil, which is one of Canada’s major exports, jumped to a seven-year high on Tuesday. However, WTI crude prices settled at $92.10 per barrel on Wednesday.

Some other commodity-linked currencies also climbed on Wednesday. The New Zealand dollar rose to a five-week high, after the country’s central bank announced an interest rate hike.

Traders continued to monitor announcements from the Bank of Canada, which is projected to increase rates for the first time since October 2018 at its meeting scheduled for next week.

The CAD/USD forex pair gained around 0.4% to settle at 1.2738 on Wednesday.

What to watch: Traders await the release of economic data on CFIB’s business barometer, manufacturing sales and average weekly earnings from Canada today. CFIB’s Business Barometer long-term index, which fell by 8.3 points to 54.3 in January, is expected to improve to 55 in February. Analysts expect manufacturing sales to grow by 0.2% in January, following 0.7% growth in the previous month.

Other Markets: European trading indices closed mostly lower on Wednesday, with the DAX 40, CAC 40 and STOXX Europe 600 down by 0.42%, 0.10% and 0.28%, respectively, and the FTSE 100 traded up by 0.05%.

Support & resistances for today

Technical Levels News Sentiment

GBP/USD – 1.3516 and 1.3528



Positive


USD/CAD – 1.2751 and 1.2767


Positive


Gold – 1,924.81 and 1,934.86


Positive


Dow Jones – 33,066.20 and 33,230.41


Positive


Nikkei 225 – 25,844.16 and 26,109.16 Positive

 

Market snapshot

What else to watch today

Saudi Arabia’s balance of trade, Indonesia’s loan growth, France’s consumer confidence index, Italy’s industrial sales, South Africa’s producer price inflation, Turkey’s gross foreign exchange reserves and Central Bank of Turkey’s meeting summary, UK’s CBI distributive trades survey’s retail sales balance, Brazil’s unemployment rate and value of loans, Mexico’s retail sales and mid-month inflation rate, US GDP growth rate, initial jobless claims, Chicago Fed National activity index, PCE price index, new home sales, natural gas stocks change, crude oil inventories, gasoline inventories, heating oil stocks, distillate stockpiles and Kansas City Fed’s manufacturing production index, as well as Argentina’s leading economic index and retail sales.

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