Hey Snackers,
Welp. A day after staging a classic “relief rally” on the Fed’s rate hike, stocks wiped it all out and then some in their worst day since 2020. The Dow and S&P dropped more than 3% and the Nasdaq fell 5%, as the economic realities of high inflation and slowing growth set back in.
Just about nothing was spared: tech led the selloff (Netflix -8%), with an assist from ecommerce (Wayfair -26%... more on that in a sec). But even banks like JPMorgan and non-cyclicals like Coke and P&G got hit.
The return of (IRL) retail therapy… While you ditch front-porch packages for fitting rooms and food courts, online retailers are being left in the dust. In yesterday’s big selloff, shares of Shopify sank 15% after the popular ecomm platform saw sales slow for the fourth straight quarter.
Caribbean cruise > cyber sales... In the past two years, nearly a fifth of every dollar spent in the US came from online orders. Yet with consumers returning to their 2019 spending habits — on concerts, vacays, and Sunday brunch — the boom in e-buying is losing momentum. US ecommerce sales have dropped 3X compared to 2020 levels. That’s showing up in the bottom line of some of the biggest pandemic winners:
The Great Normalization is here... Ecommerce sites benefited from a huge pull-forward boost in demand during the pandemic, fueled by stimmy checks and boredom. As Visa’s and Mastercard’s earnings showed, consumers are still opening their wallets — they just have new priorities. For platforms like Shopify, it means adjusting expectations for the new new normal of more balanced spending.
Come Shell or high water… Soaring energy prices: bad for consumers, great for oil companies. How great? Yesterday, London-based Shell reported a record $9.1B quarterly profit — 3X last year’s — despite $4B+ in losses related to its leaving Russia. It’s something of a trend.
Big buybacks, big blowback… US and UK lawmakers have started calling for a “windfall tax” on energy giants, a one-time tax on their excess profits. The idea is to use the cash to help consumers with rising prices at the pump. Critics say the money would be better spent investing in renewable energy.
Windfalls come in many forms… Russia’s invasion of Ukraine gave oil giants a financial windfall in booming profits. It also gave them a strategic windfall: it illustrated how dependent the global economy still is on fossil fuels, whether we like it or not. Earlier this week, VW said it planned to keep using coal because of a proposed EU ban on Russian oil. Then Shell’s CEO told investors the war proves the need for big oil producers, despite the pressure to act on the climate crisis.
Authors of this Snacks own: shares of Exxon, Twitter, Amazon, Shopify, and Netflix
Correction: We misstated that earnings were expected from Zillow and Berkshire Hathaway. They had already reported. Zillow reported on May 5 and Berkshire Hathaway on April 30. We regret the error.
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