Increasing concerns over a US economic slowdown (or just a reminder a hard landing is still possible) triggered a broad selloff in global stocks overnight and into the US premarket session.
Investors’ anxieties soared late Thursday afternoon following dismal earnings reports from Amazon and Intel. Corporate earnings have so far indicated that US consumers are struggling, and it seems only a matter of time before Goldman Sachs advises clients to short stocks with the highest exposure to high-income consumers, already telling clients to short low– and mid-income consumer stocks in recent months.
Highlighting comments from Wayfair CEO Niraj Shah, an earnings press release on Thursday stated, “Customers remain cautious in their spending on the home, and our credit card data suggests that the category correction now mirrors the magnitude of the peak to trough decline the home furnishing space experienced during the great financial crisis.”
In an interview with CNBC, Wayfair CFO Kate Gulliver warned, “We see declines that are similar to the declines that we saw in that 2008 to 2010 period and I think what that speaks to is that the category has been going through just a massive correction, a correction that we’ve previously only seen during a GDP recession.”
Gulliver continued, “Obviously we’re not technically in a GDP recession as a country right now, and so this is somewhat a unique thing to this category … we’ve seen that kind of recession-like correction in the category over the last few years.”
Separately, Goldman’s Scott Feiler told clients this AM, “The big topic all of a sudden the “last few days” is around the health of the consumer.”
Feiler said, “The slowdown has broadened out and picked up further in June/July, led by a lot of bellwethers. That alone should not be a huge debate. The debate should be intensity and whether it’s priced in.”
As for Wayfair’s second-quarter earnings report, Goldman’s Eric Sheridan said, “Wayfair produced disappointing topline results as revenue declined nearly -2% YoY with demand softening through the quarter despite a successful Way Day in early May (up DD% vs. 2023) as consumers proved increasingly price sensitive and pulled back further outside of promotional events.”
Sheridan said, “We reiterate our Neutral rating and reduce our price target from $67 to $54 mainly from lower operating estimates.”
Meanwhile, darkening clouds continue to gather over the US economy following this AM’s payroll report, which shows a big slowdown in employment and a higher unemployment rate, so much so that recession risks are rising.
Tyler Durden
Fri, 08/02/2024 – 10:00
