[NYSE Market Briefing] Markets Fall on Walmart's Uncertain Earnings Outlook... Consumer Sentiment 'Red Flag'

The three major New York stock indices fell in tandem. Analysis suggests selling pressure intensified as Walmart, a barometer of the U.S. economy, released disappointing earnings forecasts and new leading economic indicators deteriorated.

On the 19th (local time), the Dow Jones Industrial Average closed at 44,176.65 on the New York Stock Exchange (NYSE), down 450.94 points (1.01%) from the previous session. The Standard & Poor's (S&P) 500 index finished at 6,117.52, down 26.63 points (0.43%), while the tech-heavy Nasdaq Composite closed at 19,962.36, down 93.89 points (0.47%). The Nasdaq and S&P 500, which had fallen over 1% during trading, reduced their losses as bargain hunting emerged.

The market was shocked by Walmart's earnings and the deterioration in the Leading Economic Index (LEI). Concerns about weakening consumer sentiment pulled down stock prices.

Walmart reported adjusted earnings per share (EPS) of $0.66 for the fourth quarter of last year. Revenue was recorded at $180.55 billion. Both figures exceeded market expectations compiled by LSEG. However, the market was disappointed by the conservative guidance provided for this year. Walmart projected revenue growth of 3-4% and operating profit growth of 3.5-4.5% for the current fiscal year, both below market expectations.

As a result, Walmart fell more than 6% today. Competitor Costco also fell nearly 3% following Walmart's poor performance.

Tom Fitzpatrick, director at RJ O'Brien & Associates, analyzed, "When Walmart provides poor guidance, we need to pay attention," suggesting "it could indicate that the average consumer is depleted."

Investor sentiment was also dampened by the U.S. Leading Economic Index declining in January, largely giving back gains from the previous two months. The Conference Board reported that the U.S. Leading Economic Index fell 0.3% from the previous month to 101.5 in January, turning negative after a 0.1% increase the previous month and falling below market expectations of a 0.1% decline.

Justyna Zabinska-Lamonica, senior manager at The Conference Board, said, "The deterioration in consumers' future economic outlook and decreased weekly working hours in manufacturing were key factors in the decline."

Fears of economic slowdown were further fueled by U.S. weekly initial jobless claims exceeding expectations. According to the Labor Department, seasonally adjusted initial claims for unemployment benefits increased by 5,000 to 219,000 for the week ending February 15.

JPMorgan Chase, Goldman Sachs, and Morgan Stanley also fell around 4% today. Card companies like Visa and American Express declined over 1%. Big tech companies showed mixed results, with Apple, NVIDIA, and Microsoft slightly up, while Amazon, Meta Platforms, and Tesla fell over 1%. Alphabet finished slightly lower.

U.S. AI data analytics firm Palantir continued its downward trend today. News that the U.S. Department of Defense might cut its annual budget by 8% acted as negative factor. However, losses were reduced from over 10% during trading to around 5% in the afternoon.

By sector, discretionary and consumer staples fell around 1%, while financials declined 1.55%.

Key central bank officials discussed policy uncertainties. Austin Goolsbee, President of the Federal Reserve Bank of Chicago, expressed concern that the Trump administration's tariff policies could trigger supply shocks as significant as those from COVID-19.

Goolsbee noted, "While there has been significant progress in U.S. inflation declining from its 40-year high in 2022, economic uncertainties, the new administration's tariff policies, and geopolitical issues could impact inflation," adding that "additional tariffs could cause shocks on the scale of COVID-19."

Raphael Bostic, President of the Atlanta Fed, stated, "While I don't think we're facing a new inflation explosion, there are broad concerns about how new tariffs, immigration rules, and regulatory changes might affect the outlook," adding, "Overall, I think inflation will continue on a bumpy path toward the FOMC's 2% target over the next few months."

JSK@hankyung.com