The Week's Top Stories is a guided tour through the biggest market stories of the week, from winning stocks to brutal dips to the facts and forecasts generating buzz on Wall Street.
It's the Economy
It's been a hectic week for markets, and sorting it out has been a challenge, even though we watched it all play out in real-time here at Cheddar News. In the words of The Dude from The Big Lebowski, the situation has "a lotta ins, a lotta outs, a lotta what-have-yous. And, uh, a lotta strands to keep in my head, man." We got another mega rate hike from the Federal Reserve, which oddly enough led to a brief rally on Wall Street. GDP numbers dropped on Thursday, showing a decline for the second quarter in a row, which begged the question: Are we in a recession or is the economy just taking a breather? Meanwhile, an avalanche of big-name earnings reports showed that inflation is impacting companies in very different ways.
Who's Buying What
Shares of Walmart, for instance, fell earlier this week after the retail giant announced that it was lowering its profit outlook. The reason behind the mood shift? Too much inventory. The company stocked up earlier in the pandemic to keep up with a spike in demand for durable goods like electronics and furniture. Then, when spending shifted back to services, Walmart found itself sitting on a bunch of stuff that nobody wanted. To clear this stuff out, the company is taking a cue from Target, which had a similar problem, and is marking down products.
Chipotle, by comparison, seems to be weathering the shifting economy a little better. Chipotle's stock is up 15 percent this week after an earnings report showed comparable restaurant sales increasing 10.1 percent, despite higher prices. In addition, the company said it plans to raise prices again in August, and CEO Brian Niccol said he's not too worried about losing business because most of its customers are higher-income. So sorry, lower-income Chipotle-heads. Your favorite burrito bowl might not fit within your budget. Cheddar News actually had the opportunity to speak with Curt Garner, Chipotle's chief technology officer, about how the company plans to leverage new technologies to grow its business.)
McDonald's, similarly, told investors that it's been able to raise prices without tanking sales, though it pointed out that some customers are trading down (i.e. choosing cheaper items and patronizing the business less often). The company also improved its operating margin by selling off its Russian business following the country's invasion of Ukraine. The stock is up around 3.5 percent this week. In related news, the company said it's planning to abandon its plant-based burger, the McPlant, which sent down shares of supplier Beyond Meat.
How about those tech stocks? We're five paragraphs into this rundown, and they haven't come up once. What gives? Don't worry. Plenty went down this week, and it might not bode well for the rest of the economy if tech is any guide. As Cheddar News reporter Michelle Castillo wrote earlier this week, the tech industry is getting pummeled by a triple threat of supply chain woes, hiring freezes and slowdowns, and a number of industry-wide issues such as falling digital ad spending. Specifically, Meta's stock took a hit after reporting that its revenue declined for the first time since becoming a public company. However, a number of big-name tech firms did okay this week. Alphabet and Microsoft performed better on relatively strong earnings reports, and Spotify popped 17 percent after reporting user and ad growth.
Battle of the Budget Airlines
Finally, the will-they-or-won't-they saga of Spirit and Frontier Airlines' bold bid to merge into a single mega-discount carrier has come to a close. Spirit Airlines shareholders rejected the deal, clearing the way for JetBlue, which has been dogged in trying to gobble up the smaller discount line, to swoop in. Spirit and JetBlue on Thursday announced their plan to merge into what could become the fifth-largest airline. This leaves poor Frontier all by its lonesome, but of course, it's still not a done deal. The whole reason Spirit was initially hesitant about linking up with JetBlue is there are concerns about federal regulators nixing the deal on antitrust grounds. Now that deal is actually happening, we'll have to see what Uncle Sam actually does.