Is a US recession closer than you think? Home Depot’s dire warning adds fuel to the fire

Walmart’s second-quarter sales were stronger than expected, fueling optimism that a U.S. recession could be averted. That was the exact opposite of what Home Depot told investors a while back. The good news from the world’s largest retailer helped restore confidence among investors and other analysts.

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Walmart — arguably the best indicator of American spending, as it took one in every twelve dollars spent by shoppers in U.S. stores during the quarter — announced that sales rose 4.2 percent in the June quarter. Those results were much better than expected, and the company’s shares rose 6% in early trading. That rise follows more than 30% year-to-date gains in Walmart shares, which generally set the tone for the broader economy.

Walmart CEO Doug McMillon instilled even more confidence in the retailer’s performance and overall economic outlook on an earnings call with analysts. “We don’t see a weaker consumer overall,” he said, noting that consumers may still spend resiliently despite ongoing economic challenges.

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He also pointed out that Walmart can maintain strong sales without slowdowns in other industries. The better-than-expected result prompted the company to raise its expectations for the rest of the year, supporting confidence in the US economy’s ability to avoid a downturn.

This news from Walmart was timely and gave the stock market a much-needed boost, with the S&P 500 gaining 1.5% and the Nasdaq up 2.3%. Investors are optimistic that the economy can recover, and some analysts are speculating that the Federal Reserve will cut interest rates as early as September. The possibility of interest rate cuts added momentum to the market’s trajectory as lower interest rates would support the economy.

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“We’re back in an environment where good news is good news and bad news is bad news,” said eToro analyst Bret Kenwell. He noted that while investors and consumers support lower inflation, it should not come at the cost of the economy.

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Kenwell added that robust retail sales — tempering fears of an impending recession — could give the Fed more time before deciding on a rate cut. He noted that the Fed is walking a tightrope between fighting inflationary pressures and stimulating economic growth.

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In stark contrast, Home Depot issued a less encouraging report, warning that sales fell 3.6 percent in the latest quarter as fears of rising interest rates weighed on consumers. The home improvement giant attributed the poor performance to a consumer pullback in spending on renovations. An earlier warning from Home Depot added to fears of a possible recession in the US economy, with higher borrowing costs and tighter budgets putting pressure on consumers. Those fears, however, were eased by upbeat numbers from Walmart and recent jobless claims data.

According to the Commerce Department, US retail sales rose 1% in July – the biggest since January 2023 – with gains in autos, electronics and appliances. This indicates that the typical American consumer may have been more resilient than some feared.

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This article Walmart Just Dropped a Major Hint: Is a US Recession Closer Than You Think? Home Depot’s dire warning adds fuel to the fire originally appeared on Benzinga.com

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