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Today in the Market (11/16/2022)

Good Evening. Wall Street balanced an earnings warning from retail giant Target against government statistics on retail sales that showed healthy consumer spending ahead of the crucial holiday season, and equities declined on a disappointing day on Wednesday.

The S&P 500 decreased by 0.83%, while the Dow Jones decreased by 0.12%. The Nasdaq Composite Index fell 1.54%.

RETAILS ARE HURTING

Target (TGT) missed the mark by a wide margin in the third quarter due to a downturn in consumer spending on discretionary goods.

  • Earnings Per Share: $1.54 vs. $2.18 expected
  • Revenue: $26.52 Billion vs. $26.40 Billion

What will Target do? The company stated last week that it will implement a new store format in 2023 that is optimized for online shoppers, same-day delivery, and curbside pickup. The new stores will be around 20,000 square feet larger than the usual size of the chain’s outlets. In addition, the corporation said that it has initiated a company-wide efficiency initiative targeted at streamlining operations. It provided few specifics on the initiative’s key themes but stated that it aimed to save between $2 billion and $3 billion over the following three years.

Target is not the only one… In the current inflationary climate, retailers have struggled to preserve profit margins. Analysts are praising those that increased their pricing and earnings through ingenious marketing, promotional deals, or by enhancing their web presence.

DROP IN MORTGAGE RATES

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Mortgage rates experienced the greatest one-day decrease since 2009, prompting budget-conscious homeowners to hurry to lock in cheaper rates.

The volume of purchase mortgage applications grew by 4% last week, according to the Mortgage Bankers Association, and the average rate on a 30-year fixed mortgage fell by 60 basis points on Thursday, from 7.22% to 6.62%, according to Mortgage Daily News. The sharp reduction was precipitated by a decline in bond yields after October’s inflation reading exceeded expectations.

Since then, interest rates have been stagnant. Wednesday’s rates increased to 6.64%, according to Mortgage Daily News. However, it might be costly for lenders to pass on all of these savings, particularly if interest rates climb once more.

Sadly… economic uncertainty and market volatility encouraged some lenders to behave cautiously prior to reducing interest rates, making it more difficult for buyers to capitalize on the reduction.

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