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Target Drags Down A Fragile Market

By Louis Navellier. Originally published at ValueWalk.

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In his Daily Market Notes report to investors, while commenting on Target Corporation (NYSE:TGT), Louis Navellier wrote:

Retailers Dragged

Target guides down margins, dragging down a fragile market.

Target, already responsible for one market downdraft last month for disappointing results, announced that they will be heavily discounting their bloated home goods inventory, forecasting Q2 operating margin down to 2% from prior guidance of 5.3%.  The stock opened up down 9% but has since recovered to only down 3% as investors acknowledged that it’s a short-term issue and at least management is quickly addressing the problem.

Q1 2022 hedge fund letters, conferences and more

But the situation has resulted in dragging down retailers, in general, today as it raises the uncertainty of supply chain issues and changes in consumer spending patterns.

While price cuts are deflationary, it is certainly not offsetting the soaring costs of energy and other commodities. Gasoline is now above $5 a gallon in 15 states, and natural gas now $9.38 is going to deliver some shocking electric bill fuel surcharges this summer. The Bloomberg Commodity Spot Index, tracking 23 raw materials, is up 36% this year, up 1.9% yesterday on jumps in natural gas and wheat, to a new all-time high.

No Recession In US

Also today, the World bank cut global growth estimates for 2022 for a second time and 2023 as well. After the 5.7% 2021 growth, the bank started the year looking for 4.1% growth, cut it to 3.2% in April, and today cut its 2022 forecast to 2.9%, saying stagflation risks continue to rise and that poor countries will be hard-pressed to avoid a recession. They are looking for 2.5% growth in the US in 2022.

While these are certainly negative trends, the important point is that a recession in the US is nowhere on the table.

Opportunity For Upgrade

Market pullbacks are buying opportunities for strong companies caught in these downdrafts, such as Costco Wholesale Corporation (NASDAQ:COST) which dropped 3.3% on the Target news but has since recovered to down less than 1%.

Continued high volatility is very likely and will continue to present opportunities to investors to upgrade the quality of their portfolios in the still-growing economy. 

Coffee Beans

While large retailers like Walmart, Target or Home Depot dominate the imports list, the biggest U.S. exporters deal with products that don’t inspire the imagination, like paper, or that Americans would rather forget about, like their trash. Out of the top eight U.S. exporters, four deal with paper, packaging or recyclables. Other products exported in large volumes are animal feed and cars/automotive parts. Source: Statista. See the full story here.

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