OMG, Home Depot (HD) wasn't perfect. That's right, when the company reported its quarter and missed on its same sales, meaning it didn't make as much per store than we thought, it was like the world stopped.
And on a day when retail sales fell more than expected, when COVID cases continue to rage on and housing affordably hit its lowest rate in 9 years, we ended up with a moment no one wanted to see, a moment when the expansion is pausing, the people are reconsidering home renovation and the Fed is, at last getting serious about tightening. Memo to Fed: Are you kidding me?
Let's go over what happened on Tuesday, because someone has to, and it might as well be me.
This day officially started at 6 a.m., when Home Depot reported a disappointing quarter. Now, when a company does $40 billion in sales in three months, I am reluctant to criticize them. So I won't.
But it didn't take long for Craig Manear, the very sharp CEO, to shock us when we aren't in the mood for being shocked: "We have seen a shift in pattern of sales within the week as our weekday sales performance has actually strengthened relative to the weekend. ... We attributed this to consumers returning to travel and other recreation activities."
Home Depot will be fine. The professional is busier than ever and that's a fantastic customer for the chain.
The problem is if the consumer has picked an awful bad time choosing to return to travel and recreational activities. The specter of Delta is causing all sorts of decisions to be reconsidered, especially travel and leisure so the money that was supposed to be sent first at Home Depot and then on travel isn't doing anything.
So Home Depot's stock is looking down 15 before the big show even begins.
Then at 8:32 a.m., ominously two minutes late, we find out that retail sales were down 1.1% for July, a total verification of what Home Depot says. Sure, I know that Walmart (WMT) , much bigger than Home Depot, reported an amazing quarter and did not talk about a consumer frolicking, happily going to far away places. They were just spending at Walmart.
It gets worst. You know what's weakening? Car sales. Now, I could tell you a tale of car shortages and an inability to make them, because of the chip shortage. Used cars have gone up so much that I am getting a deal on my 16-year-old clunker. But when you are on a negative jag like this market, you don't think the problem is supply, no matter what you sell your used car for. You think it is demand.
Same thing when you listen to the Home Depot call about housing, which can be interpreted many ways. You can say that people aren't spending as much as they were on their home. You can say that homes got too expensive. You can say there is a shortage of homes.
But you go trying to sell that idea to the paint makers -- where the price increases have been horrendous -- or the hardware and outdoor and indoor furniture people as their sales were all down year-over-year.
Maybe the consumer isn't as healthy as we thought? Maybe the consumer is petrified about how their vaccine doesn't work as well as they thought or that there are whole parts of the country that refused to go with the program?
All we know from this conference call is that things weren't as they seemed 24 hours ago. And no big investor likes to hear that something is not as it seemed, especially when the Fed is so gung ho on raising rates as the chattering classes endlessly, well chatter.
Yep, that's what we need, a real big change by the Fed just when we are about to be walloped.
So what happens? Remember my long-term thesis: Money never leaves this casino. No one ever seems to cash out and go buy some nice Brioni suits or Bruno Cucinelli cashmere sweaters. They just change tables. They go from the "the consumer is red hot and going places" tables, where the betting limit is about 10 million to "the consumer is ice cold and going nowhere and is back hunkering down" slots with about a million dollar limit.
So you see Moderna (MRNA) rally, because Moderna means a booster we will take because we are scared to lose our precious immunity before football season.
You see Kroger (KR) takeoff, because we know that Walmart's grocery business is strong and Warren Buffett just added to his position in the supermarket chain. You see Dominos (DPZ) zoom, because people are staying at home and not eating from expensive Doordash (DASH) delivery places, but just going for the pizza with delicious banana peppers if you remember to ask for them. They lust for the too-cheap Pfizer (PFE) now that the president is raising numbers by suggesting boosters. They come for Regeneron (REGN) , because of its monoclonal antibody cocktail. And they do a supermarket sweep of Kellogg (K) , Campbell Soup Company (CPB) and J.M. Smucker (SJM) , with a name like that its stock better be good ... and it is.
Is this fatuous, lazy thinking, the kind I have been pointing out over and over again to you? Pretty much so. Remember Home Depot didn't miss its quarterly numbers, it just said buying patterns have changed.
What happens, for instance, if Home Depot competitor Lowe's (LOW) reports Wednesday and says it had none of those problems. What if Lowe's says the consumer is not only spending on her home, she is spending it harder than ever? Wouldn't shock me since Marvin Ellison, the CEO of Lowe's, is fantastic at his job.
What happens if the Fed watches "Mad Money" and realizes, Holy cow, we better hold off for better times. Why not wait and see how bad this delta variant really is?
The reevaluation of things each day is part of the "say goodbye to tranquility" portion of this market. We thought we had this smooth transition to spending on your home, to spending on travel and leisure with no let-up on spending on the home because she is so flush.
Now, instead, it looks like no travel and no spending on the home or car for that matter.
Are things as dire as all of this? I think the market as a whole is catastrophizing events -- and lord knows, I am a classic slippery slope catastrophizer from way back when. I think you pick at stocks that are collateral damage to this new worldview. The drug stocks, the real estate investment trusts, the foodstuffs all work for the moment. Of course, though, if we catch a break, if everyone from the South is either vaccinated or a recovering covidian, then you are going to have to switch gears in a hurry. So don't get too complacent about your sales. I am unmoved by my bullish stance, even if Home Depot just bushwhacked me with one of its two-by-fours that it can't sell because lumber got too high.