US stocks were mixed on Thursday after a roaring rally in the middle of the week as investors digested news from corporate America that consumer spending may be set for a slowdown and oil prices hit a four-month low.
Walmart (WMT) reported quarterly earnings that topped estimates and raised its annual outlook, though by slightly less than expected. Its shares fell around 8%. Meanwhile, Macy's (M) stock jumped more than 5% after the department store's profit beat expectations as freight costs improved.
Nasdaq hits highest close since Aug. 1
Stocks were mixed as investors digested the latest round of corporate results that flashed warnings about the American consumer headed into the holiday season.
The Dow Jones Industrial Average (^DJI) dropped about 0.1% while the Nasdaq Composite (^IXIC) and the benchmark S&P 500 (^GSPC) gained near 0.1%. The slight gain for the Nasdaq pushed the tech-heavy average to its highest close since Aug. 1.
Oil now off 20% from 2023 highs
Oil futures tanked again on Thursday with prices now at their lowest levels in nearly four months.
Crude oil futures were down as much as 5% on Thursday as concerns of a supply squeeze faded amid rising inventories and fears of a slowdown in the global economy.
On Thursday, West Texas Intermediate (CL=F) crude oil futures fell more than 5.5% to just north of $72 per barrel. Brent (BZ=F) crude oil, the international benchmark price, fell by about the same amount to just below $77.
Over the last month, WTI crude oil is down more than 16% while the price of Brent crude is off more than 14%.
Current oil prices are roughly 22% lower than 2023 highs reached in late September, as demand worries grow amid concerns of a global economic slowdown. Oil prices are on pace to log their fourth straight losing week.
On Wednesday, US inventories at Cushing, Okla. — used as the benchmark in WTI oil pricing — showed stockpiles rose by 3.6 million barrels last week, more than twice expectations for a build of 1.2 million barrels.
"The oil production surveys for October have been showing increasing amounts of OPEC+ production and combined with higher inventories in the USA and worries over demand, prices have been falling," said Andy Lipow, president at Lipow Oil Associates.
"When the market broke through $78, the selling accelerated as programmed trading kicked in."
Dennis Kissler, senior vice president at BOK Financial, also noted the breakdown in the technical setup around the 200-day moving average, which currently stands at just north of $78 per barrel.
"Technically, [December] crude futures continue to battle the 200-day moving average, which is a key technical support area; a weekly close below will likely prompt more selling," Kissler said.
Disney not letting 'Frozen' go as box office biz struggles
Disney (DIS) CEO Bob Iger revealed "Frozen 4" could be in production just months after the company confirmed a third installment of the "Frozen" franchise will also be coming to theaters.
"'Frozen 3' is in the works and there might be a 'Frozen 4' in the works too," Iger said in an interview with Good Morning America on Thursday. "I don’t have much to say about those films right now. [Director] Jenn Lee, who created the original 'Frozen' and 'Frozen 2,' is hard at work with her team at Disney animation on not one but actually two stories.”
The news comes as Disney has struggled at the box office with its recent live action film "The Marvels" drawing a dismal $47 million domestically during its opening weekend — the worst performance in MCU franchise history.
Shares have lagged the broader markets, up about 8% year to date compared to the S&P 500's (^GSPC) 17% gain over that same time period.
Analysts have warned the company's content business will likely continue to struggle in 2024.
"I don't think the studio is going to be an engine that's going to help Disney grow for the next 18 months," said Doug Creutz, analyst at TD Cowen. "I don't think it's going to get worse, but I don't think it's going to get better either."
Disney has lagged competitors at the box office, despite once being the leader in the industry. Marvel, in particular, has struggled as a franchise ever since 2019's "Endgame." Creutz blamed the results on oversaturation and a decline in FOMO, or fear of missing out, on the part of the consumer.
"There was a lot of FOMO where it's like, 'Man, if I miss this Marvel movie then I'm going to miss something important," Creutz told Yahoo Finance. "The thing with FOMO is if the ask on people gets too big, they won't go see it," he said, adding he wasn't surprised "The Marvels" flopped, especially given the harsh critic reviews.
"Marvel has asked a lot of audiences and they've done it at a time when the quality hasn't been there because they've been trying to do too many different things," he continued. "So here we are. [Disney] now has to try and fix what it broke."
Creutz said demand for animation "has definitely gone down" post-pandemic, driven by the excess of kids content on streaming platforms like Disney+. He added: "The only animated films that have done well since pandemic have been big sequels. ... Disney's pipeline didn't have any sequels in it."
Perhaps the upcoming "Frozen" sequels could put Disney's box office back on top.
Energy, Consumer Staples lead stocks lower
The Dow Jones Industrial Average (^DJI) dropped about almost 0.3% while the Nasdaq Composite (^IXIC) and the benchmark S&P 500 (^GSPC) teetered on both sides of the flat line just before 1 p.m. ET on Thursday.
As West Texas Intermediate crude oil (CL=F) declined nearly 5% to just below $73 a barrel, its lowest level in nearly four months, energy led the sectors lower. Meanwhile, Consumer Staples also stumbled after a downbeat update from Walmart.
Why lower excess savings might not mean a consumer downturn
But that doesn't mean consumer spending is poised for a total slowdown.
"[Excess savings are] less necessary to get the consumer to continue growing consumption," Hatzius explained during a media roundtable on Tuesday.
In 2022, Hatzius went on to explain, consumers needed their excess savings because real disposable income — the income consumers see after adjusting for inflation — was negative last year due to rising prices for goods and services. Real disposable income fell 6% from the year prior during 2022, the largest drop since at least 1960, per data from the St. Louis Federal Reserve.
But as inflation has moved down significantly in 2023, real disposable income has rebounded. It is pacing for 4% growth this year and nearly 3% next year, per Goldman.
"[The real disposable savings rebound] should be sufficient to keep consumption growing at an OK pace, 2% or so," Hatzius said. "Nothing super rapid, but moderate growth would be my expectation, even with reduced excess savings."
Walmart, Macy’s, and Cisco: Stocks trending in morning trade
Here are some of the stocks leading Yahoo Finance’s trending tickers page on Thursday morning:
Walmart (WMT): Shares dropped more than 12% as the company reported better-than-expected financial results but a gloomy outlook took precedence for investors.
Palo Alto Networks (PANW): Shares slid more than 5% after the company's billings guidance came in lower than expected.
Macy's (M): The stock rose more than 6% after reporting an improvement in margins and lower-than-expected drop in quarterly sales.
Cisco (CSCO): Shares plummeted over 11% after the company cut its full-year revenue and profit forecasts due to a slowdown in demand.
Yahoo Finance editor Jenny McCall contributed to this report.
Walmart slides on cautious outlook
Walmart stock is down nearly 7% as investors digested a cautious tone on the economy from Walmart executives.
Walmart posted a revenue of $160.8 billion for its third quarter earnings results on Thursday morning. Total revenue is up 5.2% compared to last year and is higher than expectations of $159.13 billion. Its US same-store sales grew 4.7%, higher than the expected 3.35%.
Adjusted earnings per share came in $0.01 higher than estimates at $1.53 versus $1.52.
Foot traffic grew 3.40%, more than the 1.50% expected. Ticket size is up 1.5%, lower than the expected 2.08%.
Despite the earnings beat, Walmart gave soft guidance for the rest of the year. It raised its full-year earnings per share outlook to $6.40 to $6.48, higher than its previous guidance of $6.36 to $6.46 but lower than the expected $6.48.
Shares fell 7% in early trading after the report.
"Recently, we've experienced a higher degree of variability and weekly performance in between holiday events in the US, including seeing a softening in the back half of October that was off trend to the rest of the quarter," said CFO John Rainey in a call with investors.
Uneven sales numbers give the retailer reasons to be more cautious about the state of consumers, Rainey added. Walmart expects sales growth to moderate in Q4 as inflation in grocery prices slows down, but "we're encouraged by the increased traffic and share gains we've seen and expect," said Rainey.
Stocks slip at the open
Stocks retreated just after the opening bell on Thursday as investors digested a slew of corporate results after a roaring rally had already sent equities significantly higher this week.
Stock futures retreat as retail earnings roll in
US stocks lost ground before the bell on Thursday as Wall Street questioned the market's confidence that the Federal Reserve will ease its tightening and big retailers Walmart and Macy's posted their quarterly results.