Stock Market Sags On Russian Aggression; Earnings From Retail Chains Fail To Lift Market

U.S. stocks traded lower Tuesday at midday after Russia moved troops into two contested parts of Ukraine. Earnings from home improvement and retail chains didn’t help. Oil prices surged.

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The Nasdaq composite slid 0.9%. The S&P 500 fell 0.8%, while the Dow Jones Industrial Average lost 1%. Volume rose on the NYSE and Nasdaq compared with the same time on Friday.

Home Depot (HD) fell nearly 8% Tuesday and was below its 200-day moving average, a level that had kept the Dow component from further deterioration.

The shares fell in spite of the home improvement chain’s earnings release this morning, which topped sales and earnings expectations. Same-store sales rose 8.1% for the January-ended quarter. Home Depot also raised its quarterly dividend 15% to $1.90 a share.

Department store chain Macy’s (M) rallied 1.6% after the company reported fourth quarter results that topped Wall Street’s estimates.

Stock Market Reacts To Russian Aggression

Russian troops poured into the Donbas region of Ukraine after Vladimir Putin recognized two areas as independent states. Western nations condemned the moves, and imposed new sanctions on Russia.

German Chancellor Olaf Scholz halted the certification process for the Nord Stream 2 pipeline that would transport Russian gas to Germany. The $11 billion project, completed late last year, was a critical question for Germany in relation to Russia’s rising threat against Ukraine.

The price of U.S. crude oil rose 2% to $92.88 a barrel.

Meanwhile, economists kept a close vigil on interest rates, with the 10-year Treasury yield ticking up near 1.94% Tuesday morning. On Friday, the 10-year Treasury yield closed just above 1.93% after two straight days of losses.

As of Tuesday, the odds for a Fed funds rate in March of 0.25% to 0.50% had increased to 71%, compared with 29% for a target rate of 0.50% to 0.75%, according to the CME Group’s FedWatch tool, which tracks interest rate futures.

Medtronic (MDT) shares climbed 3.7% Tuesday after the cardiac rhythm device maker reported a fiscal third-quarter sales miss. Medtronic says it expects to return to pre-Covid growth in the current quarter.

During the quarter ended Jan. 28, Medtronic earned $1.37 per share, minus some items, on $7.76 billion in sales. Earnings grew 6% and met the Street’s view, according to FactSet. But sales lagged expectations for $7.88 billion. Sales also dipped a fraction year over year.

Soaring Lumber Prices Push Timber Stocks Higher

For the current quarter, Medtronic calls for 5.5% organic sales growth, ticking up from 2% organic sales growth in the January quarter. The medical devices company also expects $1.56-$1.58 in adjusted profit per share. Analysts expected $1.57 a share in earnings.

Louisiana-Pacific (LPX) stock jumped 1.8% after the company reported an 11% earnings gain in its fourth quarter. EPS rose to $2.24, vs. expectations for a 0.9% EPS decline to $1.99. Revenue jumped 15% to $992 million, better than double the analyst consensus forecast for a 6% revenue gain to $912.7 million.

LPX stock has begun to build the right side of its base, but faces resistance at its 50-day and 10-week moving averages.

Meanwhile, rival Boise Cascade (BCC) is scheduled to release earnings results on Wednesday amid soaring lumber prices.

Digital World Acquisition (DWAC) rallied 7% after former President Donald Trump’s social media app Truth Social launched over the holiday weekend. The app is at the top of the Apple App Store’s list of free-app downloads, despite some glitches at the launch.

Digital World plans to merge with Trump Media & Technology Group, the owner of Truth Social. Digital World shares reached a four-month high before paring gains.

Oil Stocks On Tap To Release Earnings

The Innovator IBD 50 ETF (FFTY) fell 0.7% as natural resource stocks such as Sibanye Stillwater (SBSW), and Cactus (WHD) led the index.

Energy leaders Diamondback Energy (FANG) and Matador Resources (MTDR) will report after the close Tuesday. FANG shares are extended past a 117.81 buy point, while Matador remains above its 50-day line after a failed breakout past a 47.33 cup-base entry.

Cybersecurity leader Palo Alto Networks (PANW) will also report late Tuesday. The company is expected to earn $1.65 a share on sales of $1.27 billion. Shares are below their 50-day line following last week’s heavy losses.

Virgin Galactic (SPCE) will report fourth-quarter results after the market closes Tuesday. SPCE stock fell sharply Tuesday, down 7%. The commercial space company reopened ticket sales to the general public on Feb. 16. Sales had been closed since October after they were briefly opened following founder Richard Branson’s flight in July. FactSet analysts see a loss of 35 cents per share vs. a loss of 31 cents per share in the year-ago quarter. Revenue is seen rising to $300,000 from $0.

Consumer Confidence Unchanged From Last Month

The Conference Board’s Consumer Confidence Index for February was nearly unchanged from the previous month at 110.5.

The IHS Markit purchasing managers index, a gauge of private sector output, climbed to 56.0, above forecasts and a two-month high. The services business index climbed to 56.7, while the manufacturing PMI rose to 57.5.

“Both the manufacturing and service sectors recorded stronger expansions in output, with companies linking growth to substantial gains in new business, employees returning from sick leave, increased traveling and greater availability of raw materials,” Markit said in its report. “February data highlighted a sharp and accelerated increase in new business among private sector companies that was the fastest in seven months.”

The S&P CoreLogic Case-Shiller home price index of 20 metropolitan areas surged 18.6% unadjusted in December from a year earlier and 1.1% from the previous month.

“This late season boost was likely due to a demand rush before mortgage rates began their long anticipated rise. The beginning of that rate increase came over January and into February,” Tomo Networks economist Skylar Olsen said.

Follow Michael Molinski on Twitter @IMmolinski

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