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Retailers’ Earings Reports Continue to Exceed Expectations, But Will This Continue Next Quarter?

Miguel A. Rodriguez
Miguel A. Rodriguez
18 May 2023

Target is the latest retailer to release its first quarter earnings. Its report beat expectations but its outlook for the second quarter disappointed. A string of reports from retailers, along with continuous debt ceiling talks in the US seems to be leading to a slowdown of domestic demand.  

US stocks started yesterday's session higher as retail chains continued to report better-than-expected first-quarter earnings. 

This week, retailers are still reporting earnings. Target Corporation's first-quarter earnings topped expectations yesterday, but the company also provided a disappointing projection for second-quarter earnings. As inflation forces consumers to spend more money on essentials, they are delaying certain more personal purchases. Economists and market analysts have been speculating about a possible and gradual slowdown in domestic demand, and the economy as a whole, in the upcoming months. In fact, because of this, the interest rate curve predicts rate reductions by year's end. During the session, Target's shares increased by as much as 2.8%. 

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Debt ceiling discussions are still ongoing in Washington after US Congressmen met with President Joe Biden at the White House on Tuesday. The parties are trying to come to an agreement as the deadline for the United States to risk going into default quickly draws near. Legislators expressed optimism following yesterday's meeting that default would be avoided. The US government defaulting, even if it were just temporary, would be an unprecedented occurrence with unpredictable market repercussions, but uncertainty is still at an all-time high and there is no defined deadline for finding a solution. 

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Financial assets have not responded in a way that suggests a scenario of risk aversion up to this point. The issue has no impact on the stock indices, which remain at the top of their previous trading range. Sales prompted by worries about a temporary default are the only ones driving up bond yields, especially those at the short end of the curve. Additionally, these increases in yields are pushing gold's bearish correction to the $1975–$1980 support region while also strengthening the Dollar in what may be called a technical corrective move. 

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Sources: Bloomberg, Reuters 







Miguel A. Rodriguez
Miguel A. Rodriguez

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.