Wednesday, May 18th 2022

Three Things (5/18)

Commentary

“I have not failed. I’ve just found 10,000 ways that won’t work.” - Thomas Edison

1) Worst daily decline for Walmart stock in 35 years

  • Walmart reported mixed quarterly results on Tuesday as earnings fell short of estimates as the rising costs of food, fuel, and wages weigh on profitability.

  • Earnings are likely to drop by 1% this year, abandoning its previous forecasts for a mid-single-digit gain.

  • The discounter is attempting to strike a balance between keeping prices low, while not letting net profits slip.

Titan’s Takeaway: Walmart’s size gives it a unique perspective on the health of the US consumer and a read-through on the supply side of the retail equation. It’s clear that the “macro is impacting the micro” as consumer demand falters alongside cost inputs that continue to rise.

2) Powell indicates that the Federal Reserve will do whatever it takes to fight inflation

  • Chairman of the Federal Reserve, Jerome Powell, once again emphasized his steadfastness to fight inflation in his meeting on Tuesday.

  • Powell remarked that bringing down CPI prints will not be easy and that it could come at the expense of today’s record-low unemployment.

  • Powell made it clear that the committee will not hesitate to take appropriate actions until financial conditions are in an “appropriate place”.

Titan’s Takeaway: Following interest rate hikes from the meeting earlier this month, investors reacted positively to the clarity that Powell provided at Tuesday’s event. Inflation is turning out to be more difficult to fight and the Fed’s comments make it clear that they believe this is the most pressing issue to the US economy.

3) Baby formula shortage adds to the list of production shortcomings

  • 43% of formula was out of stock at retailers nationwide for the week ending on May 8th, following the February recall of low mineral baby formula.

  • Abbott reached an agreement with the FDA to reopen its manufacturing plant in Michigan, a key supplier for US baby formula, in an effort to help ease the nationwide shortages.

  • Nestle, the owner of Gerber baby food, airlifted infant formula from Europe to the US to help ease the supply issues in the interim.

Titan’s Takeaway: The widespread shortage has sent families scrambling across the US, with the most vulnerable being disproportionately impacted. This is yet another example of how supply chains are impacting average American families the hardest as government agencies and corporations struggle to play catch up.

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