Walmart’s second-quarter sales were higher than expected, boosting optimism that a recession in the U.S. could be averted. This was the exact opposite of what Home Depot had 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 U.S. spending, as the company spent $1 in every $12 in U.S. stores during the quarter — reported a 4.2 percent increase in sales in the quarter through June. The results were much better than expected, with the company’s shares rising 6 percent in early trading. The rise follows more than 30 percent year-to-date gains in Walmart shares, which generally set the tone for the broader economy.
Walmart CEO Doug McMillon remained optimistic about retail performance and the overall economic outlook during a conference call with analysts. “We’re not seeing a weaker consumer overall,” he said, noting that consumers remain willing to spend despite ongoing economic challenges.
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He also stressed that Walmart could maintain its strong sales without seeing declines in other sectors. The better-than-expected result prompted the company to raise its forecast for the rest of the year, underscoring its confidence in the U.S. economy’s ability to avoid a recession.
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 helped boost the market price, as lower interest rates would support the economy.
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“We are 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 would cheer 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 to cut interest rates. He said the Fed is walking 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 spending less on home improvements. 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 would squeeze consumers. However, those fears were allayed by Walmart’s positive numbers and recent jobless claims data.
U.S. retail sales rose 1% in July – the biggest increase since January 2023 – with gains in autos, electronics and appliances, the Commerce Department said, suggesting the average American consumer may be more resilient than some 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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