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Today in the Market (8/22/2023)

Good Evening! On Tuesday, U.S. stocks saw a mixed performance, with the Nasdaq Composite, being the only major index to conclude the day with gains. Meanwhile, investors continued to pay careful attention to Treasury rates. 

As mentioned above, the Nasdaq Composite was the only index to finish in the green by 0.06% while the S&P 500 & the Dow Jones finished the day down by 0.28% & 0.51%, respectively.

WIDE SPREAD SHRINKAGE

The shares of Dicks’s Sporting Goods (DKS) had a significant decline of over 24% throughout Tuesday. This decline was due to the disclosure made by the sports goods retailer on the negative effect of organized retail crime on its profitability.

How bad was it? The unanticipated reduction in size, or act of stealing, had a negative impact on the company’s adjusted profits per share, resulting in a value of $2.80 during the second quarter. This figure fell well short of the projected earnings of $3.81, as anticipated by analysts. During the earnings call, the management team of Dick’s expressed their expectation that shrinkage would continue to be at a higher level during the second half of the year

Another store, another target on its back… The widespread nature of organized retail crime has had a negative impact on the industry for companies like Target (TGT), Best Buy (BBY), Rite Aid (RAD), and Dollar Tree (DLTR), which all have together emphasized the impact of “shrinkage,” including theft, as an important factor affecting their financial performance. During the conference call on Tuesday, Lauren Hobart, the CEO of DKS, characterized shrinkage as a problem that affects the whole sector and emphasized the need for firms to collaborate with trade groups and government agencies in order to tackle this issue. What do you think should be done?

ROUGH TIMES

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According to a study conducted by Cox Automotive, it was found that the Mitsubishi Mirage was the only new model available for purchase at a price below $20,000 ($19,205) during the previous month. According to Cox’s analysis, the average price of a new automobile in July was above $48,000, reflecting a 30% increase compared to 2019. Furthermore, the quality of pre-owned vehicles was equally bad with the mean price being $27,000, with a significant increase of 30% as well.

But wait, there’s more… In addition to outrageous costs, vehicle owners are further shackled by high-interest auto loans. According to Edmunds, during the previous quarter, there was a notable increase in the proportion of new vehicle owners, reaching a record high of 17.1%, who were making monthly payments above $1,000

What else is causing this? The increasing number of large cars in the U.S. may be a reason for the nation’s obsession with oversized automobiles. This trend has contributed to a rise in costs, as manufacturers have shifted their focus away from producing inexpensive small vehicles. Also, the occurrence of supply chain disruptions caused by the pandemic has also significantly impacted manufacturing, resulting in a shortage of automobiles and enabling auto manufacturers to impose excessively high prices on their products.

On the bright side! There has been a gradual decline in the pricing of new automobiles, due to an increase in inventory levels reported by dealerships. Electric vehicles (EVs) also are seeing the greatest reduction in price as manufacturers participate in a competitive pricing strategy.

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