Walmart Sets Anxious Tone and These Two Holdings Stand Out

Following yet another record close for the S&P 500, futures point to equities trading off later on Thursday morning.

With trading volumes for the SPDR S&P 500 ETF Trust SPY over the last few days well below their average trading volume levels and even less those during the 2024 Christmas week, there seems to be a growing lack of conviction in the market. Fueling that is what can be the growing combination of tariff tensions and earnings growth concerns; a Fed that now expects to keep rates elevated for some time and one that is also worried about the impact of tariffs on inflation; and a market multiple that can once again be characterized as stretched. We’re not even going to touch the machinations emanating from Washington, D.C. that bring a whole other layer of uncertainty.

Meanwhile, data published by Barclays showed that at the end of January individual investors’ exposure to stocks is in the 96th percentile of data dating back to 1997. To that we can layer in findings from JPMorgan that sentiment across that group has also reached the highest on record, surpassing levels seen during the meme-stock mania of 2021. While the Fear & Greed Index is only flashing "Neutral," the Citibank Panic Euphoria Index’s latest reading hit 0.70, up from its prior reading of 0.67. Both of those figures are deep into Euphoria territory, which begins when the indicator hits 0.40.

With a relative strength index (RSI) reading of 61.17, the S&P 500 is not classically overbought but the combination above means yellow lights are flashing.

To that, we can add Walmart’s WMT below-consensus guidance it shared early on Thursday morning. While that miss wasn’t exorbitant — the company sees EPS of $2.50 to $2.60 versus the $2.77 consensus — as we’ve seen with some of our positions of late, even a modest miss has the potential to punish the shares. What we saw inside Walmart’s comments, however, speak to the concern about Trump tariffs. John David Rainey, the company’s CFO, commented that Walmart is “going to work really hard to keep prices low” as tariffs take their toll. And for those wondering, Walmart’s EPS outlook for the coming year does not include tariff increases.

This speaks to our thought that, as we pivot into retail-facing earnings, tariff concerns could lead management teams to issue more cautious comments and guidance relative to market expectations. In recent days, we’ve boosted our cash levels, and we still have some exposure to the market-hedging inverse ETF positions.

Membership Business Models Matter

As we think about retailers and what’s ahead, it’s time like these when the membership-based models at Costco COST and American Express AXP will stand out because of the revenue and profit base they have.

However, with COST shares technical overbought at current levels, our message to you is to stay on the sidelines for now. We do have room to add to American Express and the shares continue to hug their 50-day moving average, but the prudent move may be to wait until we hear from more retailers and let the market absorb their comments.

Current Trade Desk Thoughts

Quickly touching on Trade Desk TTD shares, given their Four rating our intent remains to unwind that position. Currently, the shares are deeply oversold, even more so than they were in August. That suggests even modest good news could lead to some recovery.

While we are inclined to wait for that to happen, should we see a larger market pullback emerge we may opt to begin that unwinding process to capture shares of better-positioned companies that offer more robust earnings growth.

More Pro Portfolio

At the time of publication, TheStreet Pro Portfolio was long COST, AXP and TTD.