All about retail today, stocks rebound, dollar drop, bitcoin follows risk rally

US stocks are rallying as traders got to digest a steady stream of positive news across the world. ​ Turnaround Tuesday started when China took the first steps to lockdown exit in Shanghai and as the nation’s top regulators discussed easing its regulatory crackdown. ​ The US session got started with big retail earnings that suggest the consumer is still strong and showed surprisingly underlying strength within the home improvement category.

A solid retail sales report and key earnings from Home Depot and Walmart painted a picture of a strong US consumer that could probably tolerate rising food and energy prices a little while longer. ​ The problem with a strong consumer outlook is that it also means the Fed tightening won’t have to ease up anytime soon.

The economy is slowing but the consumer still looks good and that means the economy is still positioned to avoid a recession. Industrial production also surprisingly rose in April, which is another sign the economy isn’t falling apart just yet.

We’ve heard from Fed Chair Powell last week and this round of data will unlikely change his outlook. Powell will probably stick to his half-point rate increases and reiterate they can do more tightening if the data warrants it. ​

Earnings

Results from Walmart and Home Depot told two different stories. ​ Walmart disappointed as profit guidance was slashed over cost pressures from fuel prices, overstaffing, and high inventory levels.

The margins aren’t attractive for Walmart and they are still ok for Home Depot. ​ The goods that people buy from Walmart include food supplies, which are seeing double-digit inflation. ​ Walmart may have increased full-year sales guidance, but that is mainly keeping up with widespread inflation impacting their goods. ​ Walmart still sees robust consumer demand but confidence for that to remain the case is fading.

Home Depot delivered a nice surprise earnings beat as home improvement for many households continues. ​ Home Depot crushed earnings and posted record first-quarter sales, which eased concerns surging home-financing costs are hurting this industry. ​ Not everyone expected to see strong sales growth from Home Depot and that should be good news for Lowes who reports tomorrow.

Cryptos

Bitcoin’s rebound is underperforming as investors remain unsure of the regulatory gauntlet that could cripple large parts of the cryptoverse. A weaker dollar is welcome news for crypto investors, but this might only mean a stabilisation for Bitcoin prices.

Stablecoins will continue to get all the attention until Wall Street is convinced all the major ones will be able to handle any future stresses. Guidelines for how stablecoins are backed and better transparency on how they apply their pricing mechanisms will be required.

The fallout from TerraUSD is still being digested, but what is surprising is that prices haven’t fallen much further. ​ UST trades around $0.11, but it is hard to imagine this so-called stablecoin will have a chance of surviving. ​

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