Futures lower, retail sales fall, Nike & FedEx warn about tariffs, Micron fails to wow
We arrived late last night after a two-week March Break. The kids didn’t get to bed until 11:30pm. They did very well considering the late flight. This morning I get to write in solitude as they all enjoy a sleep in. Ha. Just kidding, they all woke up at their regular time.
If you missed our latest episode of In the Money with Amber Kanwar you can catch it now on YouTube. I spoke with James Cook of Matco Financial. We talked about why he isn’t ready to give up on US stocks, but has some easy ways to get exposure to international markets.
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March sadness: US futures are indicating a lower open after a weak session yesterday. Earnings from giants like Nike and FedEx have the overall market in a funk as they warn about the impact of tariffs on their bottom line (more on that below). Depending how the day goes, the S&P 500 could slide for the fifth week in a row. The TSX has fared slightly better but has still been bogged down by tariff concerns. Indeed this may be the vibe until April 2nd when the White House has promised to reveal the full arsenal of their tariff war chest. “Everyone thinks April 2nd will be ‘peak fear’ day, but I guess that will really depend on whom he is playing golf with on April 1st,” wrote Bank of America’s Michael Hartnett saying that the deadline is starting to “infect” global data. One of the examples he gives is Canadian small business sentiment. As you can see below, it is worse than other previous crisis points including 9/11, the 2008 financial crisis and COVID.
Shop til ya drop: Another factor for small business pessimism could be the state of the Canadian consumer. We just got a read of retail sales in Canada that showed consumers pared back their spending for a second month in a row. The flash estimate for February showed a 0.4% drop in sales after a 0.6% decline in January. This is the first back-to-back decrease in sales since mid-2023 and happened even though there was a tax holiday to encourage consumption. However, it may not be as bad as the headlines suggest, wrote CIBC’s Katherine Judge. “The downbeat data today appears to mostly be a normalization in activity after spending was pulled forward into December with the start of the GST holiday, and leaves retail sales still over 4% above year-ago levels,” she wrote.
Win…when? Shares of Nike are down 7% despite progress in its “Win Now” turnaround strategy. Earnings soared past expectations ($0.54/share vs $0.32/share expected) and sales didn’t fall as much as feared (-7% vs -11% expected). However, sales still fell in every major market and the company warned that sales would fall more than expected next quarter. Nike also warned margins would be hit by tariffs on Chinese and Mexican made goods. China produces about 18% of Nike-branded footwear, according to Bloomberg. The long story short for investors is that the company is progressing on their turnaround but this quarter showed it’s going to be an uphill battle. “(It is) a good start to a two year journey,” wrote Randal Konik of Jefferies.
Missing package: Shares of FedEx are plunging 9% in the pre-market after cutting it’s forecasts for the third quarter in a row amidst higher costs and signs of weakening demand. The shipping company also missed Wall Street profit expectations. Loop Capital is downgrading the stock calling it a “really bad recession stock” because it’s margins tend to take a big hit when there is an economic downturn. Raymond James, on the other hand, is glass half-full on this one. “We maintain our Outperform rating as we believe palpable change is afoot as FDX’s DRIVE initiatives continue taking hold likely driving better margins, earnings, and FCF in out-years than appreciated,” wrote Raymond James’ Patrick Tyler Brown. Shares are poised to open at a near two-year low and rival UPS is down about 2% in sympathy.
Micro aggression: Shares of Micron are trading down despite beating profit expectations and signaling strong demand from AI. The world’s largest maker of computer memory chips had weaker margins than expected and warned this may continue as memory chip pricing remains challenged. This is overshadowing strong demand for AI with data centre revenues tripling from a year ago. Stifel is keeping their buy rating on the stock after earnings. “…While we do not have direct line of sight into end unit demand and mix in 2025,” wrote Stifel’s Brian Chin, “We still envision a favorable supply setup that could reinvigorate pricing and provide an added kicker to our estimate outlook.”
