Today’s headlines

What’s happening: Shares of The Home Depot edged higher on Tuesday, after the company reported results for the second quarter.

What happened: The top US home-improvement chain reported a decline in sales due to fewer big-ticket purchases.

Despite this, Home Depot reported better-than-expected results for the latest quarter amid strength in smaller project categories.

How were the results: The Atlanta, Georgia-based company reported a slight decline in sales for the three months ended in July.

• Sales fell 2% year-over-year to $42.92 billion but topped the consensus estimates of $42.25 billion.
• Earnings came in at $4.65 per share, down from $5.05 per share in the year-ago period. This figure also exceeded Wall Street expectations of $4.46 per share.

Why it matters: Markets closely monitored Home Depot’s results, which were reported before the earnings of big retailers like Walmart, Lowe’s and Target. Investors have been watching discretionary spending data due to the impact of higher interest rates and inflation.

Home Depot’s comparable sales fell by 2% in the quarter, while customer transactions contracted by 1.8%, with customers pulling back on big-ticket items, or products costing more than $1,000.

Home Depot’s big ticket comp transactions declined by 5.5% in the quarter. “After three years of unprecedented demand in the home improvement market, we continue to see softer engagement in big-ticket discretionary categories, like patio and appliances that likely reflects both pull forward of these single item purchases and deferral,” CFO Richard McPhail said during the earnings call.

The company’s operating income declined by 8.6% to $6.6 billion, while operating margins came in at 15.3%. Operating expenses rose 4.1% year-over-year to $7.6 billion last quarter.

Home Depot’s board of directors announced a new $15 billion share buyback program, which replaced the earlier authorisation. Management guided to a decline of 2%-5% in comparable sales in fiscal 2023, with earnings projected to be down by 7%-13%.

How shares responded: Home Depot’s shares gained 0.7% to close at $332.14 on Tuesday, following the release of quarterly results. The stock has added around 5% over the past month.

What to watch: Traders will watch earnings reports from other big retailers to get more insights into the overall consumer spending trends. Markets will also keep an eye on inflation data, which is expected to significantly impact Home Depot’s results ahead.

The markets today

The Canadian dollar will be in focus today ahead of a couple of economic reports

Context: The CAD/USD forex pair fell to over a two-month low on Tuesday as investors digested economic reports.

Details: Data released on Tuesday showed Canada’s inflation rate accelerating higher than projected in July.

The annual inflation rate in Canada increased to 3.3% in July, from 2.8% in the prior month and came in above market estimates of 3%. On a monthly basis, the CPI increased 0.6% in July, faster than the 0.1% rise in June.

Other data showed manufacturing sales declining by 1.7% in June, versus the preliminary estimate of a 2.1% decline and compared to the 1.2% growth reported in the prior month.

A decline in the price of crude oil, one of Canada’s major exports, exerted pressure on the loonie. WTI crude oil prices fell $1.52 to settle at $80.99 per barrel on Tuesday.

Strength in the US dollar also adversely impacted the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose slightly to 103.21 on Tuesday.

The CAD/USD forex pair fell around 0.3% to 1.3498 on Tuesday.

What to watch: Traders await the release of economic data on housing starts and wholesale sales from Canada today. Housing starts in Canada, which rose by 41% to 281,373 units in June, are projected to decline to 243,000 in July. Analysts expect wholesale sales in Canada to contract 4.4% in June, following 3.5% growth in May.

Other Markets: European indices closed lower on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 1.57%, 0.86%, 1.10% and 0.93%, respectively.

The news shaping the markets

Ukraine’s Prime Minister Denys Shmyhal thanked the German government for their support against Russia. The news sent the safe-haven US dollar index slightly lower this morning.

The Reserve Bank of New Zealand held its official cash rate at 5.5% at its August meeting, lending support to the NZD/USD forex pair.

China’s home prices fell 0.1% year-over-year in July, following a 0.1% increase in the prior month, which sent the CNY/USD pair lower in forex trading this morning.

Australia’s Westpac-Melbourne Institute Leading Economic Index came in almost flat in July, following a 0.1% increase in the earlier month, exerting pressure on the AUD/USD forex pair.

Japan’s Reuters Tankan sentiment index for manufacturers rose to +12 in August, from +3 a month ago. This being the strongest figure in a year sent the JPY/USD pair higher in forex trading this morning.

What else to watch today

UK’s consumer price inflation, retail price index and producer prices change, Eurozone’s industrial production, number of employed persons and GDP growth rate, South Africa’s retail trade and SACCI business confidence index, US MBA mortgage applications, building permits, housing starts, industrial production, manufacturing production, capacity utilization, gasoline stocks change, crude oil inventories, distillate stocks and FOMC minutes, Russia’s producer prices change, as well as Spain’s consumer confidence indicator.