Stocks fluctuated after the S&P 500 touched a fresh record intraday high today. The Dow shed more than 100 points, while the Nasdaq held onto narrow gains. Walmart and Home Depot shares turned negative despite the companies reporting estimates-topping second-quarter results, after executive commentary around slowing sales growth in the current quarter drove investor jitters.
Walmart (WMT) reported second-quarter results that easily topped consensus expectations on both sales and profit, with US comparable same-store sales up 9.3%. E-commerce sales nearly doubled, surging 97% as consumers increasingly turned online to shop during the pandemic.
However, the stock traded choppily after gaining in the pre-market session, after company executives said sales growth was normalizing and decelerating during the current quarter, as government stimulus to consumers waned.
Home Depot (HD) also delivered better than expected second-quarter results, with comparable sales growth of 23.4% in the three-month period, or more than double the 11.4% growth rate expected. Consumers and professionals alike flocked to the retailer for DIY projects while working from home, and as housing market activity and home-building picked up in late spring.
Company executives said on their earnings call Tuesday morning that third-quarter earnings results were holding at second-quarter levels, extinguishing hopes of an extended gain for the home-improvement giant. The S&P 500 in recent days has closed in on, but not quite attained, a fresh record closing high, with the blue-chip index’s advance from its March lows now totaling around 50%.
Equity trading over the past week or so has reflected a widening breadth in markets, with cyclicals vying for leadership after a months-long run of outperformance among big tech and “stay-at-home” stocks viewed as more insulated from the negative business impacts of the coronavirus pandemic.
“The path of least resistance seems to be higher for US equities as of late,” Brian Price, head of investment management for Commonwealth Financial Network, said in an email Tuesday morning. “Markets are seemingly encouraged by a nationwide improvement in coronavirus data after a spike in various parts of the country last month.
Big tech and certain consumer companies like Amazon continue to do well but we’ve also seen an improvement in relative performance of cyclical and value-oriented names as of late.” “This dynamic should be viewed as healthy for the equity market as wider breadth could be key to determining whether or not stocks will continue their advance,” he added.
“There are plenty of risk factors that investors will continue to monitor, such as a resurgence in coronavirus cases, failure to pass another relief bill, and the upcoming elections. Investors are encouraged that we’re back near all-time highs in the market, but they’ll need to stay vigilant for what lies ahead over the coming months.”
However, any signs of a full-fledged rotation out of tech names and into other areas of the market have lacked conviction, with the financials and energy sectors once again lagging during Tuesday’s session as investors considered ongoing uncertainty around the pandemic, fiscal stimulus prospects and the presidential elections.
“I think the factors around quality – quality growth, strong balance sheets, positive cash flow, dominance in industries, management team – those factors have been leadership factors across all 11 sectors, and I think that will continue to define leadership in this environment,” Liz Ann Sonders, Charles Schwab’s Senior Vice President and Chief Investment Strategist, told Yahoo Finance’s The Ticker on Monday.