by Eli Wright
Asian equity markets were stable overnight. In Japan, the Nikkei was flat, closing at 17,862.63; the Shanghai Composite edged up 0.1% to 3,208.21; the Hang Seng moved 0.45% lower, to 22,181.
In Europe the FTSE opened a bit higher, trading up 0.21% to 6,764; the DAX is down slightly, 0.4% to 10,621; the Euro Stoxx 50 is also down 0.35% to 3,020.
U.S. stocks appear to have taken a breather after last week's post-election rally. The S&P 500 dipped 0.16% to 2,176.94; the Dow fell 0.29% to 18.868.14; the NASDAQ inched just 0.36% higher, to 5,294.58. In pre-market trading the S&P is up marginally, 0.05%; the Dow is up an anemic, 0.01% and the NASDAQ is up 0.22%.
Prices on U.S. Treasuries rose and yields retreated slightly, with the 10-year at 2.2% and the 30-year yield at 2.92.
Forex
The yen, euro, and sterling all lost ground to the dollar yesterday, as the Dollar Index reached 100.57, its highest level since April, 2003, before drifting a bit lower. It's currently at 100.01.
Yesterday's PPI figures came in slightly worse than expected, with the headline number flat. Today's Building Permits and CPI releases (both out at 8:30 AM ET) should fill out the picture of recent economic activity. Markets continue to expect a Fed rate hike in December.
Mexico's Central Bank announces its latest rate decision today. It's expected they'll raise rates to 5.25% (up from the current 4.75%) to balance inflation. Some analysts are predicting an even larger, 75-basis- point hike. The Mexican peso has dropped sharply since since last week's US election.
Commodities
Following an almost 6% move higher in oil, the largest daily gain in seven months, investors took profits yesterday. Brent is currently trading at $46.79. Crude is at $45.66.
Gold made limited gains overnight, but the precious metal is sensitive to the USD, and with a Fed rate hike expected in less than a month, the outlook for gold is cloudy. Gold is currently trading at $1,230.20.
Stocks
Two big box retailers report earnings before the opening bell today:
Best Buy (NYSE:BBY), the consumer electronics retailer, will report Q3 2017 earnings; expectations are for EPS of $0.47 on revenues of $8.83 billion. Over the past five quarters, Best Buy has outperformed EPS expectations, but has missed revenue forecasts four out of five times. Best Buy has been methodically closing stores in an effort to consolidate operational efficiency, although former CFO Sharon McCollam told analysts last August during a call, “we do not have a list of stores that have negative cash flows, or significant issues.”
During today's report, investors should pay attention to whether Best Buy has improved online sales, and if they are increasing at a rate that can compensate for potential bricks-and-mortar losses. Online growth has expanded by approximately 24% YoY in each of the previous two quarters. Investors will also want to see how Best Buy’s smallest segment, international sales, performs.
Best Buy shares have gained 44% since the start of the calendar year. With Black Friday approaching, and the holiday gift buying season heating up, it remains to be seen whether the all-important fourth quarter will prove to be a positive for Best Buy investors.
Wal-Mart (NYSE:WMT), the world's largest company by revenue, is expected to report Q3 2017 EPS of $0.96 on $117.9 billion in revenues. Earnings have exceeded expectations three out of the past four quarters. In Q2, revenue increased 0.5% to $120.9 billion.
Wal-Mart has had eight consecutive quarters of positive comparable store sales growth, which last quarter increased 1.6%. However, gross profit has been hurt by lower International sales while the company's Sam’s Club unit has suffered because of lower gasoline prices.
As the largest publicly-traded employer in the world, higher wages combined with slim bricks-and-mortar profit margins make it difficult for Wal-Mart to compete with online behemoths like Amazon (NASDAQ:AMZN). Still, WMT's online sales increased 11.8% last quarter. The company has been putting in significant effort to beef up its e-tail experience: it expanded its online grocery offering; now has its own “Amazon Prime-like” subscription service; introduced its Walmart Pay mobile app, and this past August, acquired online-only retailer Jet.com in order to bolster its web shopping experience.
Wal-mart stock declined significantly in 2015, but it has rebounded nicely this year, up approximately 18% YTD. Walmart may be late to the e-tail party and continues to play catch-up to leaders such as Amazon, but it could take away market share from other conventional retailers such as Target (NYSE:TGT). Investors should look for signs of growth in the company's conventional retail segment as well as continued improvement in its online sales division.