Investing
- Today’s wholesale inflation report contradicted Tuesday’s good news of slowing retail inflation.
- Bond prices are rising, and stock prices are falling.
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The Vanguard S&P 500 ETF closed Thursday almost flat at 592.77, down just 0.01%.
BofA Securities analyst Steve Byrne removed his sell rating and upgraded S&P 500 component company Sherwin-Williams (NYSE: SHW) to neutral this morning with a $375 price target. Doing a bit of a victory lap, Byrne commented:
“When we downgraded shares to Underperform, we were concerned about a deceleration in housing markets and sell-side estimates that were overly optimistic. Fundamentally, the thesis has played out, as same-store sales growth has declined to 0.8% and 2Q results and guidance fell short of expectations. From here, [however] we have run short of negative catalysts and do not see what would make shares materially underperform.”
Hence, “neutral” is the right rating to make. It’s not impressing investors overly, however, and Sherwin-Williams stock is down 1.2% today. The Voo, on the other hand, is now precisely flat, either up or down 0.00%.
Baird analyst Michael Ha upgraded CVS Health (NYSE: CVS) stock to outperform this morning, with a $82 price target. In an acronym-laden update, the analyst also warned of downside risk in leading healthcare stock (and like CVS, an S&P 500 component stock) UnitedHealth Group (NYSE: UNH).
UnitedHealth stock is down 0.5%. CVS is up 1.1%.
Department store operator Dillard’s (NYSE: DDS) — not an S&P 500 component — absolutely crushed on earnings this morning, delivering $4.66 per share in Q2 profit versus the $3.51 analysts had expected. Revenue for the quarter squeaked past forecasts at $1.51 billion.
Dillard’s stock is nonetheless down nearly 2% in the first few minutes of trading. The Voo is off 0.25%.
This article will be updated throughout the day, so check back often for more daily updates.
Two days ago, news that US retail consumer inflation rose only 2.7% in July (that’s 0.1% less than expected) sent the stock market flying, and helped the Vanguard S&P 500 ETF (NYSEMKT: VOO) gain nearly a full percentage point in a single day. Two days later, however, the U.S. Bureau of Labor Statistics is reporting that the producer price index (which you can think of as wholesale price inflation, a bit farther up the supply chain) rose 0.9% in July.
The increase was “the biggest 12-month move since February,” according to CNBC, far more than the 0.2% increase Wall Street had expected, and pushed the annualized PPI inflation rate up to 3.3%.
Or put another way: PPI inflation is increasing so fast, the chance the Federal Reserve will lower interest rates in September just got knocked flat.
In a double-whammy for the stock market, short-term bond rates are rising in response to today’s news, with the 2-year Treasury note up 0.6 basis points to 3.695%, and the 1-year note up three times that at 3.882%.
And as interest on bonds gets more attractive, investing in riskier stocks becomes relatively less attractive. No surprise then, that the Vanguard S&P 500 ETF is trading lower premarket — down 0.3%.
Earnings
Turning now to S&P 500 component company earnings:
Tech giant Cisco Systems (Nasdaq: CSCO) beat earnings by a penny last night, reporting a $0.99 per share profit for its fiscal Q4 2025. Sales were $14.67 billion, or $50 million more than Wall Street had predicted. Nevertheless, Cisco stock is trading down about 1.5% premarket today.
Machines-maker Deere & Company (NYSE: DE) beat earnings by 17 cents this morning, reporting a $4.75 per share fiscal Q3 profit on sales of $10.6 billion — also above estimates. On the other hand, Deere lowered its net income forecast for the full year slightly, and its stock is down more than 6% premarket.
Outside the S&P 500, Advance Auto Parts (NYSE: AAP) beat earnings by 16 cents with a $0.69 per share profit on sales of $2 billion, slightly ahead of expectations. Management laid out a very wide forecast for 2025 earnings, however, saying it could earn anywhere from $1.20 per share to $2.20 per share, and really doesn’t know which. Advance Auto stock is down more than 2%.
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