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What’s happening: Shares of Home Depot gained on Tuesday, after the company reported its second-quarter results.
What happened: The home improvement retailer reported better-than-expected earnings for the latest quarter on Tuesday.
Home Depot failed to meet sales expectations and slashed its guidance for a key sales metric, which limited the overall gains for the stock.
How were the results: The Atlanta, Georgia-based company reported growth in sales for the second quarter.
Why it matters: Elevated interest rates and sticky inflation have forced customers to postpone buying new homes and making bigger renovations and remodelling, which in turn impacted the overall sales of home improvement retailers like Home Depot.
The company’s customer transactions declined 1.8% in the quarter. Its comparable sales contracted by 3.3%, while US comparable sales shrank 3.6%.
Operating margins contracted by 22 basis points (bps) year-over-year to 15.1%, while operating income fell 0.83% to $6.534 billion.
The average ticket fell 1.3% to $88.90, while sales per retail square foot contracted by 3.6% to $660.17.
“The underlying long-term fundamentals supporting home improvement demand are strong. During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects,” commented Ted Decker, chair, president, and CEO.
Management raised their 2024 sales outlook to $156.49 billion – $158.01 billion, from $154.20 billion. However, the comparable sales growth was projected to decline by 3%-4%, versus their earlier forecast of a 1% decline.
The company also projected adjusted earnings of $14.66-$14.96 per share, versus market estimates of $15.14 per share.
How shares responded: Home Depot’s shares gained 1.2% to close at $350.07 on Tuesday, following the release of quarterly results. The stock has lost around 2% over the past month.
What to watch: Investors will continue monitoring borrowing costs and inflation in the US, which are expected to significantly impact the company’s overall results ahead.
Home Depot recently announced the acquisition of building materials supplier SRS Distribution and expects the deal to add around $6.4 billion to its sales during the year.
Context: The EUR/USD forex pair gained on Tuesday, amid weakness in the US dollar.
Details: The US dollar came under pressure during Tuesday’s session, following the release of PPI data, which lent support to the EUR/USD forex pair. US producer prices rose 0.1% in July, following a 0.2% gain in June.
The report fuelled speculations of the US Federal Reserve cutting its benchmark interest rates as early as in September.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, lost more than 0.5% to 102.56 during the session.
Markets also responded to a survey that signalled weaker-than-projected investor confidence in Germany. The ZEW Indicator of Economic Sentiment for Germany declined by 22.6 points to a reading of 19.2 points in August. The figure came in below market estimates of 32. The ZEW Indicator of Economic Sentiment for the Eurozone dipped to a nine-month low of 17.9 in August.
Traders also increased their speculations of the European Central Bank announcing at least two interest rate cuts by their October policy meeting.
The EUR/USD forex pair gained around 0.6% to 1.0995 on Tuesday, while the EUR/GBP slipped around 0.2% to 0.8548. The STOXX Europe 600 Index rose by 0.52% to close at 501.66.
What to watch: Investors await the release of data on employment change, GDP growth rate and industrial production from the Eurozone today. Employment in the Eurozone is expected to increase by 0.2% in the second quarter.
Analysts project GDP growth of 0.6% year-over-year for the second quarter, compared to a 0.5% expansion in the prior quarter. Industrial Production in the Eurozone, which fell 0.6% in May, is expected to increase by 0.5% in June.
Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.04%, 1.68% and 2.50%, respectively.
Russia’s military forces have reportedly increased their attacks on the Pokrovsk front in Ukraine’s eastern region. The news sent the safe-haven US dollar index higher in forex trading this morning.
Japan’s Reuters Tankan sentiment index for manufacturers declined to +10 in August, versus July’s reading of +11, exerting pressure on the JPY/USD forex pair.
South Korea’s unemployment rate declined to 2.5% in July, from 2.8% in the previous four months. The region’s jobless rate falling to an eight-month low sent the KRW/USD pair higher in forex trading this morning.
South Africa’s unemployment rate increased to 33.5% in the second quarter. This being the highest level in two years exerted pressure on the ZAR/USD forex pair.
The American Petroleum Institute said that US crude oil inventories shrank by 5.205 million barrels in the week ending August 9, compared to market expectations of an increase of 2 million barrels, sending the WTI crude oil prices higher this morning.
UK’s inflation rate, producer price inflation and retail price index, India’s wholesale prices and total passenger vehicle sales, France’s inflation rate, US MBA mortgage applications, inflation rate, crude oil stocks change, gasoline stocks change and distillate stocks, South Africa’s SACCI business confidence index, as well as Argentina’s inflation rate.
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