From Wall Street to Main Street
Highlights from the past week
Market / Macro Economic Summary Markets continued their up and down as the tariff discussions remain in the headlines. We did have a Federal Reserve meeting this week in which Fed Chair Jerome Powell did provide commentary which relieved the markets as he expressed a desire to provide market support and the projections for the remainder of the year now sit at two possible 25 basis point reductions. I would like to address the seemingly growing concern of slowing or recession though I do not see that in the outlook. While economic indicators like GDP (Gross Domestic Product) have seen a small reduction, unemployment remains at 4.1%, and US Industrial Production rose by 0.7% in the current month. These are all signs the economy remains in solid footing and my thought progression is that once we resolve most of these tariffs with other nations, President Trump will focus on lowering taxes and driving economic activity. Investors just need a bit more patience and the markets will reverse course and head back towards highs. As you’ll see below, most reports are coming in stronger than expected but management commentary on tariffs and the uncertainty of how long they’ll be in place bring stocks down. Company Specific / Micro Economic Summary Darden Restaurants (DRI) Shares were up 5.22% as the restaurant chain delivered a better than expected quarter. Earnings per share of $2.80 exceeded the calls for $2.79. Revenue of $3.16 billion was just shy of the calls for $3.21 billion. The main culprit for the revenue miss was lower results from Olive Garden and Longhorn Steakhouse chains. The restaurant company blamed weather for the sales slowdown and maintained its full-year forecast, lifting investors’ confidence that the rough quarter was a blip. “Even if consumers say they’re feeling less optimistic, we haven’t seen a huge correlation between that and dining out,” CEO Rick Cardenas told analysts on the company’s conference call. “So I think as long as incomes are going up and outpacing inflation, I think they’re likely to keep spending.” Micron Technologies (MU) Shares dropped 8% as the company reported a top and bottom-line beat but once again tariffs struck down the optimism. Earnings per share of $1.56 were fourteen cents better than the calls for $1.42. Revenue of $8.05 billion were an increase of 38% and better than the $7.90 billion analysts were looking for. CEO Sanjay Mehrotra said data center revenue tripled from a year ago. He also flagged concerns over NAND oversupply and pricing pressure which could weigh on future margin and revenue. Nike (NKE) Shares slid about 6% despite the retailer delivering a top and bottom-line beat but the culprit was once again lowered guidance. Revenue of $11.3 billion were $300 million ahead of the Wall Street expectations of $11.0 billion. Earnings per share of $0.54 cents were 85% better than the calls for $0.29 cents. Management expects its sales decline in the fiscal fourth quarter, which is set to end in May, to be at the “low end” of the “mid-teens range,” far worse than analysts expected. CEO Elliott Hill said its guidance is based on its ongoing restructuring efforts, plus tariffs (20% China tariffs imposed by President Trump) and sliding consumer confidence. FedEx (FDX) Shares were down 9% as the company delivered a mixed quarter. Revenue of $22.2 billion was just ahead of the estimates of $21.9 billion. Earnings per share of $4.51 were twelve cents lower than the analyst expectations of $4.63. The main issue on the quarter was management’s lowering its full-year profit and revenue forecasts due to stubbornly soft demand and uncertainty in the U.S. industrial economy as President Donald Trump imposes tariffs on trading partners. “Our revised earnings outlook reflects continued weakness and uncertainty in the U.S. industrial economy, which is constraining demand for our business-to-business services,” Chief Financial Officer John Dietrich said in a statement. Parting Thoughts We welcome an opportunity to discuss the above detail and wish you much success in the rest of your week! Regards, Erick J. Palacios, MBA Wealth/Fiduciary Advisor