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Today in the Market (5/27/2022)

Good Evening. The major indexes ended a weeks-long losing trend on Friday, with a slew of more cheerful corporate results at least temporarily offsetting fears of a severe economic decline.

The S&P 500 surged into the close, finishing up 2.47%. The blue-chip index has risen by more than 6.50% since last Friday and is up 3.33% today, ending a seven-week losing skid and posting its best week since November 2020. The S&P 500 has also recovered its losses for the month of May. The Dow finished in the green as well at 1.76%.

EARNINGS

Dollar General (DG), a cheap retailer with locations across the country, has had its stock rise 21.12%, according to data from S&P Global Market Intelligence. Last Friday, the stock ended at $187.60, but by Friday, it had increased to $228.38.

  • Earnings per share: $2.41 vs. $2.31 estimate

Despite inflationary pressures and some supply challenges, Dollar General raised its revenue and earnings-per-share (EPS) growth forecasts to 10% to 10.50% and 12% to 14%, respectively. It also stated that share repurchases would cost $2.75 billion. Chief financial officer John Garratt noted on the business’s first-quarter earnings call that the company anticipates comparable-store sales and EPS growth to be better in the second half of the year since first-half comparisons will be harmed by sales last year that were boosted by stimulus money.

During economic downturns, Dollar General and other discount retailers have done well. People, especially those on lower incomes, are looking for methods to cut costs as the markets fall and inflation rises, which fits into Dollar General’s business strategy.

Looking Forward… Dollar General’s success will hinge on its ability to pass on inflationary effects by raising prices. Many things in the store used to be $1, but that has changed, and if this does not turn customers away, the corporation can increase profit margins. Investors will be looking for another robust quarter, given the previous quarter was the first to demonstrate inflationary impacts.

HELIUM SHORTAGE

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Nebraska football fans at Memorial Stadium unleash a swarm of balloons, a tradition that stretches back more than 50 years. This fall, though, that will not be the case. Due to a helium constraint, the university will not be delivering balloons to fans.

Dollar Tree executives indicated yesterday on an earnings call that a shortage of helium was endangering balloon sales, while Party City executives expressed similar concerns in their report earlier this month.

A helium shortage is more significant than one would think. The rare gas is employed in rocket fuel, MRI machines, and to fill weather balloons, which are objectively more essential. Helium is so important to national security that the government decided to build a national helium stockpile in the 1960s. Congress voted in 1996 to begin selling the stockpile, but they recognized they were selling helium too cheaply and hiked prices in 2013.

  • According to Axios, the National Weather Service warned that due to a global helium scarcity, it would have to restrict the frequency of weather balloon releases.

Zoom out: Helium cost roughly $65 per thousand cubic feet in FY 2013. Prices fell to $100 in FY 2021, slightly lower than the $119 peak seen during the last widespread helium scarcity in 2019.

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