Bad sign from Walmart, McDonald's and Coke report, GM's supply chain struggles

TUE, JUL 26, 2022

1. Stock futures slide

U.S. equities markets were set to decline Tuesday morning after Walmart cut its profit outlook Monday (see more below), sending a shock wave through the retail sector. Stocks have shown signs of life in recent weeks, but they’re still on shaky ground after a terrible first half of the year. The major indexes were mixed Monday, with the Dow up, the S&P 500 effectively flat and the Nasdaq down. The busy earnings schedule continues, as well. General Motors, McDonald’s and Coca-Cola all reported before the bell Tuesday. Google parent Alphabet, Microsoft and Chipotle are set to announce after the market close. Investors will also be looking at new economic data Tuesday morning: the Case-Shiller Home Price Index for May will be released at 9 a.m. ET, while consumer confidence and new home sales data are due out at 10 a.m.

2. Walmart's warning

Walmart, the biggest retailer and grocer in the United States, gave people who are worried about a recession another reason to be concerned when it lowered its profit guidance after the bell Monday. Shoppers, the company said, were spending more on essentials like groceries, which typically have low profit margins, and eschewing items like electronics. Walmart, in turn, is cutting prices on merchandise that’s piling up on shelves, such as clothes, which is also denting its bottom line. The company’s stock fell. The warning also weighed on other retailers, including Target and e-commerce behemoth Amazon. Shares of both companies declined in off-market hours, as well.

3. McDonald's and Coke report

Two big consumer companies reported their quarterly results Tuesday morning, giving investors of taste of how people are contending with high inflation. Coca-Cola topped analysts’ estimates on its top and bottom lines, as it raised prices to offset higher costs on things such as freight, aluminum and corn syrup. McDonald’s, meanwhile, said same-store sales increased 3.7% in the United States, beating StreetAccount estimates of 2.8%. The rise was largely due to some price hikes and the popularity of its value offerings, McDonald’s said.

4. Supply chain vexes GM

General Motors on Tuesday posted earnings that fell short of Wall Street’s expectations. The Detroit automaker said parts shortages prevented it from shipping nearly 100,000 vehicles during the most recent quarter. The company, however, maintained its profit outlook for the year. GM is also getting ready for a potential recession, according to CEO Mary Barra. “We have also modeled many downturn scenarios and we are prepared to take deliberate action when and if necessary,” she said in a release. Crosstown rival Ford is slated to report results after the bell Wednesday.

5. Fed's two-day meeting kicks off

Even as they digest a slew of earnings reports this week, investors will be locked in to what the Fed says Wednesday afternoon, following the conclusion of its two-day meeting. Most expect the central bank to hike rates by 75 basis points (each basis point equals 0.01 percentage point), but with inflation still surging, market watchers are seeking any hints about what Chair Jerome Powell and his fellow policymakers will do next. “I think it’s going to be a mixed bag. He’s going to be talking ahead of what could be another quarter of real GDP decline,” Vincent Reinhart, chief economist at Dreyfus and Mellon, told CNBC.

– CNBC’s Sarah Min, Melissa Repko, John Rosevear, Amelia Lucas and Ian Krietzberg contributed to this report.

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