US Stocks Open Lower on Disappointing Home Depot Results and Slowdown in Retail Sales

Around 1:55 p.m. GMT, the Dow Jones fell 0.53%, the Nasdaq index yielded 0.13% and the broader S&P 500 index dropped 0.35%.

“The market is disappointed by the results of Home Depot”commented Quincy Krosby, of LPL Financial.

The DIY store chain (-1.49%) published a turnover well below expectations, down 4% over one year. Considered one of the barometers of consumption in the United States, the group admitted that its sales were “under pressure”.

In addition to the deceleration in the housing market, “there is a general deterioration in spending”, noted Neil Saunders of GlobalData, “as people reduce their non-essential purchases”.

“This is Home Depot’s worst quarter in a long time”noted Adam Sarhan, of 50 Park Investments. “It shows that the consumer may be weaker than previously thought, which would increase the likelihood of a recession by the end of the year.”

To this were added retail sales for April in the United States, which emerged up only 0.4%, against 0.8% expected by economists.

These data “suggest that household spending will decelerate in the second quarter”, anticipated, in a note, Rubeela Farooqi, of High Frequency Economics.

Contrast painting

The picture is nevertheless mixed, as sales excluding automobiles, gasoline, building materials and food did better than expected, with growth of 0.7%, against 0.3% announced.

“The results of Target (Wednesday) and Walmart (Thursday) will be important to have a better perception of consumers”said Quincy Krosby, about the two retail giants.

In the immediate future, Home Depot’s communication penalized the entire distribution sector, from direct competitor Lowe’s (-1.51%), to Target (-0.26%). Conversely, the e-commerce giant Amazon escaped the movement (+1.21%).

For Quincy Krosby, the direction of the indices is also explained by “concerns related to the negotiations on the debt ceiling”.

US President Joe Biden is due to meet with parliamentary opposition leaders, including Republican Speaker of the House of Representatives Kevin McCarthy, on Tuesday to try to find a compromise. But the latter said on Monday that the two camps still had positions “distant” from each other.

A sign that the political crisis is beginning to have a concrete impact on the market, the rate of one-month US Treasury bills reached its highest level in at least twenty years on Tuesday, at 5.57%. Treasury Secretary Janet Yellen repeated Monday that the United States could be forced to default on its debt in early June, failing an agreement.

On more distant maturities, bond rates rose slightly. The yield on 10-year US government bonds was 3.54%, against 3.50% the day before closing.

Listed, the Horizon Therapeutics laboratory (-18.19%) was weighed down by information from the Bloomberg agency, according to which the American competition authority, the FTC, is preparing to take legal action to block its acquisition by biotech Amgen (-0.78%). The transaction was announced in December for $27.8 billion.

The online bank Capital One (+4.14%) benefited from the equity investment of Berkshire Hathaway, Warren Buffett’s holding company, which bought nearly a billion dollars worth of securities from the McLean (Virginia) group in first trimester.