What's moving markets today: May 30, 2019
It's a good time to be a big-box retailer in America.
Costco (COST) said Thursday that sales at US stores open at least a year increased 5.5% during the first quarter of 2019 compared with the same period a year ago.
Costco's profit beat Wall Street's forecasts, but its stock ticked down slightly after hours.
Costco added to the string of strong results from big retailers such as Walmart (WMT) and Target (TGT) to start the year. As many department stores and mall brands struggle, these retailers have the size and muscle to drive down prices on an array of products.
More than half of Costco's business comes from groceries. That helps it bring in steady foot traffic since most Americans still prefer to buy their food at stores.
Gap (GPS) slid 10% after trading hours Thursday as the ailing brand stumbled to start off 2019.
Sales at Gap stores open at least a year plunged 10% during the brand's first quarter compared with the same period a year ago, one of the biggest drops across retail this quarter.
“This quarter was extremely challenging," Gap CEO Art Peck said in a statement.
Gap previously announced plans to close 230 stores over the next two years. Gap had more than 1,200 stores around the world open at the end of the quarter.
However, the company said it remains on track to spin off its Old Navy brand in 2020.
Old Navy has been outpacing the Gap for years, although the brand had a disappointing to the year.
Sales at Old Navy stores open at least a year dipped 1% during the first quarter compared with the same period a year ago.
US markets finished modestly higher on Thursday, recovering a small chunk of this week’s losses.
Despite the gains, all three major indexes are still down on the week. The Dow is on track for its sixth consecutive weekly decline, the longest since June 2011.
US oil prices tumbled nearly 4% to $56.59 a barrel – the lowest since March 8. Crude was slammed by a bearish inventory report and lingering worries about the trade war. Halliburton (HAL), Marathon Petroleum (MPC) and Baker Hughes (BHGE) fell sharply.
United CEO Oscar Munoz said the airline wants Boeing to make up for all of the revenue it lost due to the 737 Max airplane grounding
"There will be recompense of some sort over time," Munoz said earlier today at New York's LaGuardia airport, according to FlightGlobal. "The discussion of that is a bit early. Let's get that aircraft back to flight safely."
The carrier announced last week that it had extended cancellations on routes using the troubled plane into August. United expects to cancel roughly 2,400 flights in June and July, a large chunk of the busy summer travel season.
United (UAL) has 14 Max 9s in its fleet. That plane is a longer version of the Max 8, the Boeing model that was involved in two fatal accidents.
Yesterday, Boeing (BA) CEO Dennis Muilenburg said the company will work with airlines on different forms of compensation for the grounding.
Muilenburg said some of that compensation could be in supplying services or future purchases at reduced cost.
Wall Street remains in the green, but stocks shed some of their gains from the open:
Notably, the price of oil tumbled 1.7% to $57.83 a barrel in late morning trade.
The British pound dipped below $1.26 on Thursday, its lowest level against the dollar since late December. That makes for a 3.2% drop in the past month.
Fears that Britain will leave the European Union without a deal have been trashing the pound since Prime Minister Theresa May announced her departure last week.
That's because whoever succeeds May as prime minister will face the same Brexit nightmare.
The European Union has said it's done discussing the terms of Britain's departure. And the current deal, negotiated by May, faces seemingly insurmountable opposition in Britain's parliament.
Put another way: The risk of another delay to Brexit or a "no deal" Brexit are rising.
US oil prices turned sharply negative on Thursday on concerns about excess supply.
Crude came under pressure after the government's weekly oil inventory report showed that stockpiles fell by 282,000 barrels last week. That's far shy of the 857,000 barrel decline that analysts polled by Refinitiv estimated.
The bearish news sent crude sinking 1.7% to $57.83 a barrel in late morning trade. Oil had reached $59.70 a barrel earlier in the day.
Crude has been hurt in recent weeks by concerns about too much supply and fears that the US-China trade war will dent demand.
US commercial oil inventories now stand at 476.5 million barrels, or roughly 5% above the five-year average for this time of the year, according to the US Energy Information Administration.
The declines come a day after a particularly turbulent session in the energy market. US oil plunged nearly 4% on Wednesday to as low as $56.88 a barrel before staging a sharp rebound. Crude ended the day down just 0.6%.
The popularity for LaCroix has fizzled out, according to an analyst.
Sales for the flavored carbonated water are "effectively in free fall," wrote Laurent Grandet, a beverage analyst for Guggenheim, in a new note.
He cited increased competition for similar-type beverages, the "lack of meaningful or disruptive innovation," and blamed inexperienced management from its parent company, National Beverage (FIZZ).
We think it’s unlikely that LaCroix can recover to any meaningful degree while in the hands of National Beverage (or in the absence of a strong distribution partner)."
National Beverage CEO Nick Caporella once bizarrely said a drop in LaCroix sales "was the result of injustice!"
National Beverage's stock is down 1.6% in early trading and down 35% for the year.
The news keeps getting worse for Kraft Heinz. Shares of the Warren Buffett-backed company tumbled 3% Thursday after an analyst at Credit Suisse cut his price target on the stock to $26 a share -- below the current price. The stock is now down nearly 37% this year.
Kraft Heinz (KHC) has already said it was restating earnings from 2016 and 2017 because of employee misconduct. And the company has yet to report its most recent results for the second quarter. That's not a good sign, according to Credit Suisse's Robert Moskow.
Moskow argues that there could be more bad news to come, saying that "we have no visibility into whether the SEC is satisfied with the company’s response, whether its accounting firm PwC will sign off on the financials, or whether the company has put in place sufficient controls to restore confidence in its financial reporting."
And Moskow said the aggressive cost cutting and layoffs at Kraft Heinz since Buffett's investing partner 3G Capital took over may be the root of the problem.
We fear that the dramatic reduction in Kraft Heinz’ headcount after its merger may have played a role in the breakdown of internal controls. When a company loses institutional knowledge in highly complex areas of the business, the consequences can be severe," he wrote.