Midday Market 05/16: Tech carries the market, macro data continues pessimistic

Market gaps down at open before AI hype pulls tech rally

Almost all indices gapped down at the opening this morning after disappointing ER report from Home Depot and retail sales data causing disappointment on Wall Street in the morning. However, investors poured money into the tech sector right from the opening bell, especially companies related to artificial intelligence, helping pull the entire market into a strong rally in the first 15 minutes of opening before SPY reversed and dropped sharply by 2 points. Money rotation was quite evident as energy companies also went ex-dividend this week, pulling investors out of retail and oil sectors into technology, creating clear divergence between major indices and also internally.

Home Depot announces worst revenue growth in 20 years, cuts 2023 forecast, blames weather, lumber prices and consumers

• Q1 Results:

  • Net sales $37.26 billion, -4.2% y/y, estimate $38.34 billion

  • EPS $3.82 vs. $4.09 y/y, estimate $3.80 * Customer transactions -4.8%, estimate -5.36% 

  • Comparable sales -4.5% vs. +2.2% y/y, estimate -1.42%

  • US comparable sales -4.6% vs. +1.7% y/y, estimate -2.14% 

  • Average ticket sales $91.92, +0.2% y/y 

  • Average ticket +0.2%, estimate +2.63%

  • Sales per square foot -4.7%

  • Merchandise inventories $25.37 billion, estimate $26.16 billion

  • Total location count 2,324, +0.3% y/y, estimate 2,323

  • SG&A expense $6.36 billion, -3.9% y/y, estimate $6.84 billion

• 2024 Forecast:

  • Sees comparable sales -2% to -5%, estimate -0.73%, saw approx. flat (Bloomberg Consensus) 

  • Sees sales -2% to -5%, saw approx. flat

  • Sees EPS down 7% to 13%, saw down mid-single-digits 

  • Sees operating margin 14% to 14.3%, estimate 15.5%

Market awaits bipartisan debt ceiling deal, CDS continues to show no confidence in default