The news shaping the markets today

The Reserve Bank of New Zealand boosted its official cash rate by 25 basis points to 1.0% at its recent meeting, lending support to the NZD/USD forex pair.

Australia’s construction output contracted 0.4% during the three months to December 2021, missing market expectations of 2.5% growth. Despite this, the AUD/USD pair rose in forex trading this morning.

South Korea’s Business Survey Index on business conditions in the manufacturing sector climbed to 91 in February, from 90 a month ago, sending the KRW/USD forex pair higher.

Argentina’s trade surplus shrank to $296 million in January, from $1,068 million in the year-ago month. The ARS/USD forex pair remained flat after the news.

US composite PMI climbed to 56.0 in February, versus an 18-month low of 51.1 in the prior month. However, the Dow Jones index tumbled around 480 points on Tuesday.

What’s happening: Shares of Home Depot fell on Tuesday, despite the company reporting better-than-expected results for its fourth quarter.

What happened: The largest US home improvement chain managed to grow its average ticket sales amid rising inflationary pressures.

However, Home Depot said it expects one of its key metrics to remain under pressure this year.

How were the results: The home improvement retailer reported growth in sales and earnings for its fourth quarter, with both metrics surpassing market views.

• Net sales grew 10.7% to $35.72 billion, exceeding market expectations of $34.87 billion.
• Net income climbed to $3.35 billion, or $3.21 per share, up from $2.86 billion, or $2.65 per share, in the year-ago quarter, beating Street projections of $3.18 per share.

Why it matters: The covid-19 pandemic boosted the DIY (do-it-yourself) trend and increased the spend on home décor, with people spending spent more time at home. Both these phenomena supported Home Depot’s business.

However, with the easing of restrictions, the overall demand Home Depot’s products has declined from the covid-19 peak levels. Moreover, the company is also facing pressure from higher inflation and supply chain constraints.

The company’s same store sales surged 8.1% year-over-year last quarter, beating market estimates of 4.9%. Its US comparable sales jumped 7.6%, also ahead of market forecasts.

Home Depot’s average ticket size climbed 12.4% to $85.11 per trip, which propelled the company’s overall revenue growth despite an increase in product prices. However, visits to its stores declined to 402.5 million, from 416.8 million in the previous quarter.

Management projected earnings growth in low single digits for fiscal 2022, with net interest expenses of about $1.5 billion. The company added that it expects sales and comparable sales growth to be slightly positive in the year.

Amid high inflation, the company’s gross margins contracted 35 basis points to 33.2% in the fourth quarter. Management don’t expect a recovery in margins in the near term. However, the company raised its quarterly dividend by 15% to $1.90 per share.

How shares responded: Home Depot’s shares plummeted 8.9% to close at $316.17 on Tuesday. Analysts on average said that investors seem to have been spooked by the pressure on the company’s margins due to inflation. The stock has tumbled around 23% year to date.

What to watch: Investors will continue monitoring updates on inflation and supply chain bottlenecks.

The markets today

Crude oil will be in focus today ahead of the API’s (American Petroleum Institute) data on crude stockpiles

Context: Oil prices jumped to their highest level since 2014 on Tuesday, amid rising tensions between Russia and Ukraine.

Details: Russia’s President Vladimir Putin ordered troops into two breakaway regions of eastern Ukraine, which raised oil supply concerns and boosted oil prices on Tuesday. Russia is the world’s third-largest oil producer.

The US and EU announced more measures in a bid to discourage Russia from taking an offensive stance in Ukraine.

The OPEC+ (Organization of the Petroleum Exporting Countries and allies) also resisted calls for a further increase in their oil supply.

Meanwhile, markets continued to monitor the ongoing talks between Iran and world powers on reviving the country’s nuclear agreement, which could increase overall oil supply.

Brent crude gained 1.5%, or $1.45, to close at $96.84 a barrel on Tuesday. Earlier in the session, the global benchmark jumped to $99.50 per barrel, its strongest level since September 2014. WTI crude oil for March delivery climbed 1.4% to settle at $92.35 per barrel. The April contract added $1.70, or 1.9%, to close at $91.91 on Tuesday.

In other energy trading, March natural gas gained 1.5% to $4.498 per million British thermal units, while March gasoline settled at $2.711 a gallon, up 1.5%.

What to watch: Traders await the release of API’s data on crude oil inventories. US crude stockpiles fell by 1.076 million barrels during the week ending February 11, marking the fourth straight week of contraction. The EIA’s data on crude stockpiles, scheduled for release of Thursday, will also be in focus.

Other Markets: US indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.42%, 1.01% and 0.99%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s GfK consumer climate indicator, Indonesia’s value of loans, France’s manufacturing climate indicator and business climate indicator, Eurozone’s inflation rate, India’s money supply M3, Brazil’s IPCA-15 consumer price index, current account and foreign direct investment, US MBA mortgage applications and Redbook index, as well as Argentina’s leading economic index and economic activity estimator.