Wall Street Lunch: Walmart Tumbles As Weak U.S. Sales Spark Consumer Spending Concerns

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Walmart cuts outlook after slow sales growth. (0:15) Alibaba investors weigh AI spend vs. cloud growth. (1:24) Treasury yields rebound on Philly Fed. (2:00)

This is an abridged transcript of the podcast:

Our top story so far, Walmart (WMT) flashed a warning about consumer spending with cautious guidance in its latest earnings report.

The retail giant also stumbled on domestic sales, sending shares lower.

Walmart guided for Q3 EPS of $0.62 to $0.64, below the $0.69 consensus. For the full year, Walmart sees EPS of $2.80 to $2.87, compared with the $2.90 consensus.

During the call, management said its below-consensus outlook reflects the continued prioritization of re-investing remaining tariff refunds into customer rollbacks.

Shares are down nearly 10%, and Bespoke Invest notes that would be Walmart’s sixth decline in its last seven earnings reaction days.

Comparable sales in the U.S. rose 2.6%, missing the consensus estimate of 3.7% by more than a full percentage point and marking the slowest growth in six years.

Walmart’s adjusted operating income rose 17.4%, including the impact of tariff refunds, partially offset by price investments during the quarter. Adjusted EPS came in at $0.81, topping the $0.74 consensus.

Retailers Kohl’s (KSS), Ollie’s Bargain Outlet Stores (OLLI), Dick’s Sporting Goods (DKS), Savers Value Village (SVV), BJ’s Wholesale (BJ), PriceSmart (PSMT), Dollar Tree (DLTR) and Costco (COST) are all lower.

Among other active stocks, Alibaba (BABA) is down but off its lows post-earnings as investors weigh a sharp increase in AI spending against accelerating cloud growth.

Analysts remained broadly positive on the stock, with cloud strength supporting their views.

Deere (DE) is up after topping fiscal Q3 forecasts. The results provided further evidence that strength in construction equipment, smaller farm machinery and turf products is helping offset the downturn in large agricultural equipment.

And Advance Auto Parts (AAP) is plunging after the retailer noted the impact “constrained” household budgets had on the do-it-yourself channel during Q2, particularly in the last four weeks of the quarter.

On the economic front, treasury yields are back on the rise, with the 10-year (US10Y) back at 4.75% and the 30-year at 5.25%, after the Philly Fed Manufacturing Index came in surprisingly strong.

The index rose to 47.4 in August from 41.4 in July, confounding expectations for a drop to 25. It was the highest level since April 2021.

Treasury Secretary Scott Bessent said the government may increase its buybacks of 30-year Treasuries beyond the $4B per issue he announced Wednesday.

Bessent told CNBC that part of the reason for increasing the buybacks is to signal “that we believe that the yields don’t reflect the underlying fundamentals.”

For one thing, we’ll get to the other side of Iran, he said.

And in other news of note, University endowments that backed SpaceX (SPCX) long before its record-setting IPO are confronting an enviable but potentially risky question: how much of their winning investment should they keep?

Harvard disclosed a $2.2B SpaceX position, its largest publicly reported investment. The University of California Investments holds about $1B, while the University of North Carolina has a similar position, Bloomberg reported.

SpaceX shares have traded between $108.27 and $201.80 since their June debut, making the universities’ results increasingly dependent on a volatile public stock.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.