Walmart’s second-quarter sales were higher than expected, fueling optimism that a recession in the U.S. could be averted. This was the exact opposite of what Home Depot told investors some time ago. The good news from the world’s largest retailer helped restore confidence among investors and other analysts.
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Walmart — probably the best indicator of American spending, as it took in one in every twelve dollars spent by customers in U.S. stores during the quarter — reported that sales rose 4.2% in the quarter ending June. Those results were much better than expected, and the company’s shares rose 6% in early trading. That rise follows more than 30% year-to-date gains in Walmart shares, which generally set the tone for the overall economy.
Walmart CEO Doug McMillon expressed optimism about retail trends and the general economic outlook in a conference call with analysts. “We are not seeing weaker consumers overall,” he said, stressing that consumers remain keen to spend despite ongoing economic challenges.
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He also stressed that Walmart could maintain its strong sales even without downturns in other industries. The better-than-expected result prompted the company to raise its expectations for the rest of the year, underpinning confidence in the U.S. economy’s ability to avoid a downturn.
The Walmart news came at the right time and gave the stock market a much-needed boost. The S&P 500 gained 1.5% and the Nasdaq rose 2.3%. Investors are optimistic that the economy can recover, and some analysts are speculating that the Federal Reserve will cut interest rates as early as September. The possibility of rate cuts added momentum to the market’s performance, as lower rates would support the economy.
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“We’re back in an environment where good news is good news and bad news is bad news,” said Bret Kenwell, an analyst at eToro, noting that while investors and consumers welcome lower inflation, it should not come at the expense of the economy.
Kenwell added that robust retail sales – which are dampening fears of a looming recession – could buy the Fed more time before deciding on rate cuts. He mentioned that the Fed is balancing a fine line between fighting inflationary pressures and stimulating economic growth.
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In contrast, Home Depot released a less encouraging report, warning that sales fell 3.6% last quarter as consumers feared rising interest rates. The home improvement giant attributed the poor performance to consumers’ reluctance to spend on renovations. An earlier warning from Home Depot had heightened fears of a potential recession in the U.S. economy as higher borrowing costs and tighter budgets weigh on consumers. However, those fears were tempered by Walmart’s positive numbers and recent jobless claims data.
U.S. retail sales rose 1% in July, the largest increase since January 2023, with gains in autos, electronics and appliances, according to the Commerce Department, suggesting the average American consumer may have been more resilient than some had feared.
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This article Walmart Just Dropped an Important Hint: Is a U.S. Recession Closer Than You Think? Home Depot’s Dire Warning Adds Fuel to the Fire originally appeared on Benzinga.com
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