by Shane Ormond
On May 21, 2020
Target reported that online sales on an average day in April exceeded last year’s Cyber-Monday sale, because if you’re not going to buy a Cuisinart Perfectemp 14 Cup Programmable Coffee Maker at the end of the world, when are you gunna buy one?
- Walmart Sales Surge as Americans Stock Up
- One-Third of Small Businesses Will Go Out of Small Business
- Southwest Shares Jump as Bookings Outpace Cancellations
- A Breakout Performance
Walmart Sales Surge as Americans Stock Up
Walmart sales surged last quarter as Americans bought enough toilet paper to build themselves a little toilet paper castle and call themselves the toilet paper king.
(Much to the chagrin of the Duke of Wet Rag and Baron Von I Guess I’ll Just Take a Shower Every Time I Go.)
While consumer spending in the U.S. dropped sharply in March and April due to the Tom Hanks virus (let’s call it what it is!), Walmart reported a surge in sales driven by a scramble for food and household goods.
Like many businesses in this forsaken hell world, Walmart’s footfall fell in the first quarter. At the same time, spending per transaction surged 16.5% as the entire country ate their anxiety.
(If it’s the end of the world, I’m going out eating my brands, damn it.)
The big-box chain said it tracked a surge in sales in April when Americans received their government stimulus checks, and folks stimulated themselves some snacks and wide-screen televisions.
The largest gain in sales came from Walmart’s e-commerce segment, with online sales jumping 74% as millions of Americans switched to ordering their groceries online (and using the time saved for productive activities like baking bread or screaming into a pillow).
Walmart said it absorbed $900 million in coronavirus related costs, including raising wages, hiring more staff, and retraining greeters to stop giving every customer a tender little kiss on the lips (it was probably about time this practice stopped anyway).
Even with those additional costs, the company reported a 4% rise in net income to $4 billion. Earnings per share were $1.18, just a little bit higher than analysts were expecting. Shares of Walmart Inc. (WMT) rose 3.7% in premarket trading, surging to an all-time high.
The company said it was well positioned to continue operations during the pandemic, but it withdrew financial forecasts for the rest of its fiscal year, citing the entire planet imploding and turning into a highly concentrated ball of pain in my ass.
One-Third of Small Businesses Will Go Out of Small Business
The devastation to small businesses is more devastating than previously thought and frankly I’m devastated, a survey conducted by Facebook finds.
In a survey of 86,000 small and medium-sized business owners, one-third of business owners says they will not be reopening after the pandemic. (And you just know that includes the one place you actually like, where the 300-lb ex-marine chef makes your breakfast into a little smiley face.)
Facebook compiled the report as part of an ongoing data initiative with the World Bank and Organization for Economic Cooperation and Development, and it has some grim implications for the post-pandemic economic recovery effort. (Not least of which is the availability of face-based breakfast items.)
According to the report, more than half of owners surveyed said they would not be rehiring the workers they had before the crisis. (“I’m going to hire someone hotter, who gives me less attitude,” said all business owners.)
If these figures are accurate and hold true for the nation at large, we could be looking at a long and hard path to recovery, with many people struggling to find work even as states start to reopen and life returns to normal (whatever that means).
Facebook’s mean and terrible report with no good news also revealed a dramatic shortfall in paid sick leave for employees of small and medium-sized businesses. Of the employees surveyed, 74% reported not having access to sick leave. Those numbers leapt to 90% for hotel, café, and restaurant employees.
Southwest Shares Jump as Bookings Outpace Cancellations
Shares of Southwest Airlines (which has the stock ticker “LUV” for some reason) surged more than 6% today as bookings outpaced cancellations for the first time since all the planes got sucked into a swirling vortex in the Bermuda Triangle last March.
The only airline company that hasn’t worked out assigned seating yet says it has started to see an uptick in demand and sales for June 2020.
The airline company (who is hell bent on never letting me sit next to my wife for some reason) said operating revenue for May will likely be down as much as 90% year-over-year.
With the modest increase in sales, June should be sl-i-i-ightly better with operating revenue clocking in at just 80% to 85% lower than the same period last year.
The airline company (who once sat me next to a drunken children’s entertainer going through a very messy divorce) will cut the number of flights by 55% next month, compared to June 2019.
Even with that reduction, Southwest expects all of its flights will be more than half empty. (But you can bet your ass they’ll somehow find a way to seat you next to a weirdo going through an emotional life crisis.)
Shares of Southwest (LUV) surged more than 6% this morning, as desperate investors seized on any glimmer of hope in these dark and uncertain times. (I ate a Dorito sandwich for lunch today. What is going on?)
Despite the half-heartedly optimistic report, the company pulled its guidance for the year for obvious airplane-sucking-vortex reasons.
“The revenue environment remains uncertain and may require additional capacity reductions depending on passenger demand,” Southwest said in its filing.
In Other News
ONE LAST THING
A Breakout Performance
In the last few issues of One Last Thing, our in-house economy wonk Graham Summers has been giving you the basic tools to become a better trader.
In today’s issue, Graham discusses “breakouts” and how professional traders use this key trading concept to profit from the markets.
Stocks Break Out, But Is It the Real Thing?
By Graham Summers
Over the last week, we’ve covered three trading terms: “resistance,” “support,” and “trendlines.”
By way of review:
- Resistance is a particular price level that stocks struggle to break above. From a supply and demand perspective, resistance represents a level at which buying demand struggles to overcome selling pressure. As a result, this level acts as “resistance” to a rally.
- Support represents a line at which stocks refuse to break lower. From a supply and demand perspective, support is where buyers come into the market to absorb selling pressure. This is what stops the markets from breaking down further.
- Trendlines are diagonal lines formed by a series of moves that end at lower or higher levels. These lines help determine trends, and when combined with support and resistance, can allow you to make note of major changes in the markets.
Our timing on these topics could not have been better.
The market showed us the significance of both resistance (red line below) and support (green line) several times last week. And as I write this, Monday morning before the market opens, stocks have just broken out above resistance.
This represents a new trading term we’ve yet to cover: “the breakout.”
Stocks Stage a Breakout
Breakouts occur when an asset breaks above or below a particular line of importance (resistance or support). We are seeing one occurring in the stock market this morning – stocks are breaking out above the resistance line we’ve been tracking for the last week.
There are two types of breakouts: confirmed and false.
A confirmed breakout occurs when an asset breaks above or below a line of significance and is able to stay there. When this happens, it signals that the market has made a significant change. One of the hallmarks of a confirmed breakout is that the line in question changes in nature.
For instance, if the line was a line of resistance, a confirmed breakout will feature that line becoming a form of support. Meaning the very line the market had a difficult time breaking above is now holding the market, or supporting it.
I’m talking about a move that would look like this:
By way of contrast, a false breakout occurs when an asset breaks above or below a line of significance and is UNABLE to stay there. When this happens, the asset typically reverses hard and then moves violently in the opposite direction.
I’m talking about a move that would look like this:
For this reason, a lot of professional traders I know refuse to buy breakouts.
Instead, they wait to see if the breakout is confirmed or false. Doing this ensures that they only trade setups that have a high probability of success.
As I wrote earlier in this piece, stocks are staging a breakout this morning. Will it be a confirmed breakout or a false breakout? I don’t know. No one does. But the pros I know won’t be trading much until they know the answer.
I suggest you do the same.
[Editor’s Note: Please take a moment to watch this interview with fellow editor Graham Summers, who called the market crash of 2008 to a “T.” It seems that history is repeating itself, and Graham’s proprietary system is thriving, with an outstanding 77% win rate. The details behind his success are in this brief video interview.]
Closing Data for Today
|S&P Index 500||2,922.19||1.07%|
- Disney’s top streaming exec resigned yesterday to take over as CEO of TikTok.
- Oil prices continue to rise, lifted by supply cuts and an increase in global fuel demand.
- Uber is cutting an additional 3,000 jobs and closing 45 offices. The company’s ride business was down 80% in April from a year earlier.
Editor, One Last Thing