Listen below or on the go on Apple Podcasts and Spotify
National Retail Federation says survey sets up a good holiday season. (0:16) Shopify jumps on earnings. (2:46) Activist Elliott aims for Honeywell breakup. (4:21)
This is an abridged transcript of the podcast.
Our top story so far. Retail sales had a strong month in October as the economy remained in good shape and consumers moved past concerns about a port strike. That’s according to the CNBC/NRF Retail Monitor released by the National Retail Federation.
There had been some speculation from analysts that consumers would hold back during the month due to economic and election concerns.
NRF CEO said: “Healthy spending resumed in October as consumers continued to benefit from this year’s job gains and higher wages. Inflation is mostly limited to services at this point, and prices for some retail goods are actually falling. October sales have set the stage for a good start to the holiday shopping season.”
Total retail sales, excluding automobiles and gasoline, were up 0.74% seasonally adjusted month over month. They were up 4.13% year-over-year. That compared with a decrease of 0.32% month over month and an increase of 0.55% year over year in September, when shoppers showed caution due to geopolitical tensions, a strike at East and Gulf Coast ports, and the end of student loan relief programs.
Core retail sales (excluding restaurants, in addition to automobile dealers and gasoline stations) were up 0.83% on a month-over-month comparison and up 4.59% year over year.
The official retail sales figures are due Friday, with economists predicting a 0.3% rise in the headline number and a 0.2% rise in core retail sales.
Looking to a retail landscape with tariffs, Pantheon macroeconomist Samuel Tombs says the best hope for households “is that retailers absorb a chunk of the rise in import prices.”
“PPI data show that retailers’ gross margins remain bloated, after they surged between mid-2021 and mid-2022. The evidence from the late 2010s is mixed, with some studies showing retailers reduced margins but others demonstrating complete pass-through to consumer prices,” he said. “We’re assuming, therefore, that retailers
absorb about 20% of the resulting rise in import prices.”
In today’s trading, stocks are little changed, with more action in the bond market as traders catch up after the Veterans Day holiday.
Treasury yields are gaining again, with the 10-year (US10Y) back at 4.4%.
In commodities, gold (XAUUSD:CUR) is under pressure again but off the lows of the session as it tries to arrest the recent decline.
In the previous session, front-month gold futures saw their biggest daily decline since June 2021, extending last week’s sharp drop as the U.S. dollar index (DXY) continues to rise.
TD Securities strategist Daniel Ghali says gold is also struggling on concerns that the Fed could delay its easing cycle.
Among active stocks today, Shopify (SHOP) is rallying. The company said revenue rose 26% year-over-year in Q3 to $2.16 billion. It was the sixth consecutive quarter of greater than 25% revenue growth, excluding logistics.
Looking ahead, Shopify (SHOP) sees Q4 revenue growing at a mid-to-high-twenties percentage rate on a year-over-year basis, which is a higher rate than the implied guidance. Gross profit dollars are expected to grow at a year-over-year rate similar to Q3.
Home Depot (HD) reported revenue rose 6.6% year-over-year to $40.2 billion in Q3. Comparable sales in the U.S. decreased 1.2% for the quarter that ended on October 27 to beat the consensus expectation for a drop of 3.3%.
Looking ahead, Home Depot expects total sales to increase about 4% for the year and comparable sales to be down 2.5%, which was an improvement from its prior outlook of -3% to -4%. It expects to add around 12 new stores.
Nvidia (NVDA) was initiated with a Buy rating and $178 price target at Redburn. Analysts cited the continued prevalence of artificial intelligence spending.
And Sea Limited (SE) is rallying sharply despite mixed results.
SA analyst Multiplo Invest noted the company reported a +12.8% q/q and +30% y/y revenue expansion to $4.3 billion, adding there were advances in all segments, with emphasis on Shopee and Sea Money, with the expansion of financial services in Brazil and Asia.
The “results corroborate the thesis that the company is firmly on the path to profitable growth.”
In other news of note, Honeywell (HON) rose after activist investor Elliott Investment Management accumulated a more-than-$5-billion stake, looking for management to consider a breakup.
Elliott said in a letter it wants Honeywell to separate its aerospace and automation business into two separate companies. It says a separation of Aerospace and Automation would result in share-price gains of 51%–75% over the next two years.
Elliott’s Marc Steinberg and Jesse Cohn wrote that while Honeywell’s “performance has lagged, its market positioning remains sound, and comparable valuations continue to reach new highs.”
Honeywell didn’t immediately respond to Seeking Alpha email request for comment.
And in the Wall Street Research Corner, Eric Johnston, senior managing director at Cantor Fitzgerald, highlights a metric that shows that the Magnificent 7 stocks might not be the unstoppable fighting force they have been.
The earnings growth rate forecasts for the stocks—Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Nvidia (NVDA), Meta Platforms (META), Tesla (TSLA)—are getting closer to those of the broader market.
The projected growth rate for the group for 2025 has been falling and now is very close to reaching the 14% expected for the overall S&P 500.
Read the full article here
