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Trends & Analysis
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Trends & Analysis
News

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News

Who wins the S&P 500’s bank battle?

News

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Can anything stop NVIDIA?

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Target hits bullseye in Q4, shares rise

 

Wednesday, March 01, 2023

The news shaping the markets today

A senior Pentagon official said that the US does not expect Russia to make significant territorial gains in its war with Ukraine. The safe-haven US dollar index rose this morning.


China’s official NBS non-manufacturing PMI improved to 56.3 in February, from 54.4 in the previous month, lending support to the CNY/USD forex pair.


Japan’s Jibun Bank manufacturing PMI fell to 47.7 in February, from 48.9 in the prior month, sending the JPY/USD pair lower in forex trading this morning.


Australia’s economy grew 0.5% in the fourth quarter. This being the fifth straight quarter of growth lent support to the AUD/USD forex pair.


Ireland’s AIB manufacturing PMI rose to 51.3 in February, from 50.1 a month ago. This was the strongest reading since last October and sent the EUR/USD pair higher in forex trading this morning.

 

What’s happening: Shares of Target Corporation gained on Tuesday, after the company released results for its fourth quarter.

What happened: The big-box retailer posted better-than-expected results for the latest quarter on Tuesday.

The company’s shares climbed, despite management issuing a weak profit guidance for the year.

How were the results: The Minneapolis, Minnesota-based company reported growth in sales for the fourth quarter.

  • Sales grew 1.3% year-over-year to $31.39 billion, beating the consensus estimates of $30.72 billion.
  • Earnings came in at $1.89 per share, which exceeded Wall Street expectations of $1.40 per share.

Why it matters: Target cut prices on a range of products, from toys to electronics, in a bid to clear inventories. Although the higher discounts drove customer traffic in the latest quarter, it impacted the company’s gross margins.

Inventory at the end of January was down 3% year-over-year, at $13.5 billion. Gross margins shrank by 300 basis points to 22.7% in the quarter. Target added that it may need more promotions to drive sales through 2023.

Its comparable sales rose 0.7%. Although this was significantly lower than the 8.9% surge last year, it was better than analyst expectations of a 1.5% contraction.

Target paid $497 million in dividends during the fourth quarter, up from $432 million in the previous year.

“Strength in Food & Beverage, Beauty and Household Essentials offset ongoing softness in discretionary categories,” CEO Brian Cornell said during the earnings call.

Several retailers, including Home Depot and Walmart, have issued conservative guidance for the year on concerns of an economic slowdown during the second half of the year due to rising borrowing costs.

Target projected comparable sales in a wide range for fiscal 2023, from a low-single digit decline to low-single digit growth. Management guided to earnings of $7.75-$8.75 per share, much lower than the consensus estimates of $9.23 per share.

How shares responded: Target’s shares gained 1% to close at $168.50 on Tuesday, following the release of quarterly results. The stock has added around 11% year-to-date.

What to watch: Investors will keep an eye on rising borrowing costs and higher inflation, as both could significantly impact Target’s results this year.

The markets today

Crude oil will be in focus today ahead of the EIA’s (Energy Information Administration) report

Context: Oil prices moved higher on Tuesday, amid optimism around higher energy demand from China.

Details: Crude prices have remained rangebound since December, with WTI crude oil trading between $70 and $80 per barrel.

Investors continued to monitor the demand outlook of China, the world’s largest energy consumer, with the country reopening after three years of strict covid-19 restrictions. Meanwhile, Russia announced plans of reducing production in response to fresh sanctions imposed by Western countries.

However, concerns around the global economic outlook limited gains for oil as did expectations of the US Federal Reserve continuing to increase interest rates.

Although oil prices recorded gains on Tuesday, but both WTI and Brent crude recorded monthly declines of more than 2%.

WTI crude for April delivery gained $1.37 to close at $77.05 per barrel on the NYMEX on Tuesday, while April Brent crude added $1.44 to reach $83.89 per barrel on ICE Futures Europe.

In other energy trading, March gasoline gained 6 cents to $2.43 a gallon, with March heating oil coming in unchanged at $2.82 a gallon. April natural gas added 2 cents to settle at $2.75 per million British thermal units.

What are expectations: Traders await the EIA’s data on crude oil, gasoline and distillate stockpiles today. US crude oil stockpiled had grown by 7.648 million barrels to 850.6 million in the week ended February 17 and are expected to rise by 0.457 million barrels in the latest week. US gasoline stockpiles are projected to increase by 0.464 million barrels, while distillate stocks are expected to decline by 0.462 million barrels.

Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.71%, 0.30% and 0.13%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY  – 136.35 and 136.42 Negative
USD/CAD – 1.3633 and 1.3635 Positive
Gold – 1833.81 and 1835.21 Positive
Palladium  – 1424.02 and 1433.02 Positive
FTSE 100 – 7871.35 and 7884.08 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0595, 0.16%) Dow ($32,688, 0.02%) Brent ($83.92, 0.6%)
GBP/USD (1.2042, 0.16%) S&P500 ($3,974, -0.04%) WTI ($77.51, 0.6%)
USD/JPY (136.31, 0.07%) Nasdaq ($12,060, -0.10%) Gold ($1,836, -0.1%)

What else to watch today

Russia’s manufacturing PMI, real wages, business confidence, retail sales, GDP and unemployment rate, Turkey’s manufacturing PMI, Spain’s manufacturing PMI and new car sales, Italy’s manufacturing PMI, France’s manufacturing PMI and new passenger car registrations, Germany’s manufacturing PMI, unemployed persons, unemployment change, unemployment rate and inflation rate, Eurozone’s manufacturing PMI, South Africa’s manufacturing PMI and new vehicle sales, UK’s mortgage lending, consumer credit, mortgage approvals, manufacturing PMI, net lending to individuals and nationwide house price index, Mexico’s business confidence indicator, manufacturing PMI and government budget value, US MBA mortgage applications, manufacturing PMI, ISM manufacturing PMI and construction spending, Brazil’s manufacturing PMI, net payrolls and balance of trade, as well as Canada’s manufacturing PMI.


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