Today in the Market (5/25/2022)

Good Evening. Investors pondered a torrent of company warnings on the impact of inflation on earnings, as well as the Federal Reserve’s latest comments about employing measures to rein in rising prices, as they pushed higher at the end of a turbulent day.

The S&P 500 finished in the green by 0.95%, while the Dow rallied at the end of the day by 0.60%. The Nasdaq finished strong, up 1.51%.

EARNINGS

Dick’s Sporting Goods (DKS) stock plummeted more than 14% on Wednesday morning as the company became the latest to cut full-year earnings and sales guidance as economic concerns resurfaced.

  • Earnings per share: $3.64 vs. $3.43 estimate

The athletic goods company now expects adjusted earnings of $9.15 to $11.70 per share for the fiscal year 2023, a significant decrease from the previous range of $11.70 to $13.10 per share. According to the business, comparable store sales will likely decrease between 2% and 8% this year, compared to a previous forecast of sales remaining flat to falling 4%. According to its earnings release, Dick’s Sporting Goods modified its guidance “to reflect the impact of developing macroeconomic conditions.”

However, this did not last long because over the last ten years, the company has consistently increased revenue and net profit, and it has a dedicated customer base. Over 70% of revenues were produced by Dick’s scorecard members during the quarter. 

With this in mind, DKS finished 9.69% up at $78.14 per share.

THE FED IS BACK

The minutes from the Federal Reserve’s most recent meeting, released Wednesday afternoon, reinforced Fed Chair Jerome Powell’s previous statements that the central bank was considering two more half-point rate hikes.

“Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings,” according to the minutes. “Many participants assessed that the Committee’s previous communications had been helpful in shifting market expectations regarding the policy outlook into better alignment with the Committee’s assessment and had contributed to the tightening of financial conditions.”

The Fed left space for future policy decisions to be guided by new economic data, which has recently weakened. However, it highlighted that its principal goal remained lowering inflation and that a “restrictive stance of policy” may be required as a result.

“Participants agreed that the economic outlook was highly uncertain,” according to the minutes, “and that policy decision should be data-dependent and focused on returning inflation to the Committee’s 2% goal while sustaining strong labor market conditions. At present, participants judged that it was important to move expeditiously to a more neutral monetary policy stance. They also noted that a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.”

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