Durable Goods -0.1% Beat Expectations; DKS Stomps Again
Wednesday, August 25, 2021
Market indexes are sleeping in a bit this morning, following a Tuesday session that saw the 50th record-high close of the year on the S&P 500. It and the Nasdaq set new all-time highs, while the Dow is within a percentage point of its new high. All indexes are hovering around zero-balance at this hour, with the Dow slightly in the green and the S&P and Nasdaq single-digits in the red.
The big economic print this morning came in the form of Durable Goods Orders for July, where the expected negative headline turned out to be stronger than expected: -0.1% versus -0.5% analysts were anticipating on the preliminary read. This follows the unrevised June headline of +0.8%, and lower than the monthly average +1.3% through 2021 thus far.
We see how Transportation orders in the month, or the lack thereof, worked as something of an albatross last month: without them, our figure rises to +0.7%, 20 basis points higher than anticipated. Non-Defense, ex-Aircraft orders — a well-known proxy for “normal” business spending, like office space, computers, etc. — came in unchanged from the previous month. This marks the first non-improvement in business spending since the negative number registered in February.
Take a look at the business investment proxy in June’s revision, however, and we see it’s bumped up 30 basis points to a solid +1.0%. Not only that, but year-over-year new orders gained +16.4%, +14% on the shipments side. These are both better than expected. Productivity enhancement investments — +2.9% in machinery and +3.3% in computer-related orders — may not be eye-popping figures, but they do show growth in areas that may reap better production in the future.
This Friday, the Jackson Hole Economic Symposium gets underway — virtually this time (just like last year), due to the Delta variant outbreak of Covid-19 — under the title “Macroeconomic Policy in an Uneven Economy.” Participants look forward to the scheduled address from Fed Chair Jay Powell regarding how economic growth in an environment of “uber-accommodative” policy — may be augmented, going forward.
A plurality of analysts feel this is the optimum time for Powell to make some sort of announcement regarding a schedule for tapering asset repurchases this fall, in order to rein in some of the excesses in the economy now that a) inflation is running hotter than the optimum 2%, and b) employment numbers continue to improve throughout the country. But Powell has been resistant to switching back to old policy thus far; will he remain stubborn?
Dick’s Sporting Goods DKS continues its impressive streak of earnings beats over the last five quarters, with $5.08 per share shooting past the $2.80 in the Zacks consensus in this morning’s Q2 earnings release. This marks a positive surprise of +81.4%, which is actually below the trailing 4-quarter average beat of +137%. Revenues of $3.27 billion in the quarter represent a huge top-line beat of 15.5%.
The Zacks Rank #1 (Strong Buy) stock reported same-store sales up 19.2% year over year, and lest we think this is off a Covid-related low base effect, recall that Dick’s was one of those companies that surged through the pandemic, selling copious amounts of exercise gear delivered to people’s homes. Shares are now trading up +104% year to date, up another +13% in today’s pre-market. For more on DKS’ earnings, click here.
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