Walmart Woes, Coinbase, Tech Earnings, Russian Gas Flows - What's Moving Markets

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By Peter Nurse

Investing.com -- Walmart issues a profit warning as inflation hits discretionary spending, Coinbase receives further SEC scrutiny, while crude oil rises after Russia reduced the flow of gas into Germany via the Nord Stream 1 pipeline. Stocks are seen trading lower ahead of this week’s start of the Big Tech earnings deluge. Here's what you need to know in financial markets on Tuesday, July 26.

1. Walmart issues profit warning

Walmart (NYSE:WMT) provided the latest indication of the impact of soaring inflation on U.S. shopping habits, as the retail giant slashed its full-year profit forecast late Monday.

The company, which often acts as a bellwether for the retail sector, said its full-year profit would decline 11% to 13%, compared to the 1% fall it previously forecast, citing surging prices for food and fuel prompting customers to cut back on discretionary purchases.

This week sees a number of consumer-goods giants reporting, including the likes of Coca-Cola (NYSE:KO), McDonald’s (NYSE:MCD) and Procter & Gamble (NYSE:PG), and Walmart’s results are likely to cause concern for investors.

Additionally, the weaker outlook will provide Fed policymakers with a fresh data point to consider as they start the latest two-day policy-setting meeting later in the session, seeking to determine where the economy will be headed over the coming months.

2. Coinbase comes under scrutiny

Coinbase Global (NASDAQ:COIN) isn’t having a good 2022. The crypto trading platform has seen its stock price fall over 70% so far this year as digital currencies lost their popularity.

A few weeks ago influential investment bank Goldman Sachs downgraded its stance on the company’s stock to ‘sell’, saying it “will need to make substantial reductions in its cost base in order to stem the resulting cash burn as retail trading activity dries up.”

And now the U.S. Securities and Exchange Commission is taking a close look at the company.

Bloomberg reported Monday that the U.S. securities regulator is investigating whether Coinbase improperly let Americans trade digital assets that should have been registered as securities.

Coinbase denies any irregularities, but this investigation comes on top of a former product manager at the company being charged after an investigation into an alleged insider trading scheme, revealed last week.

3. Stocks set to open lower; Walmart’s warning weighs

U.S. stock markets are set to open lower Tuesday, with the retail sector expected to be hit hard by Walmart’s profit warning [see above] ahead of the start of the Federal Reserve’s two-day policy-setting meeting.

By 06:00 AM ET (1000 GMT), Dow Jones futures were down 125 points, or 0.4%, while S&P 500 futures were down 0.2%, and Nasdaq 100 futures were also down 0.2%.

The Federal Reserve commences its latest meeting later Tuesday, but it won’t be until Wednesday that the decision of the policymakers is made public.

Ahead of this the earnings season hits its full stride. The likes of Coca-Cola, McDonald’s, and General Motors (NYSE:GM) are set to report earnings before the bell, with investors looking to see if Walmart’s disappointing outlook is matched.

Tech giants Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) report after the close, and their numbers are likely to influence Wednesday’s trading.

The economic data slate includes the Case-Shiller Home Price Index, June new home sales, the CB consumer confidence index for July as well as monthly Redbook index.

4. Russia cuts gas supplies to Europe

The relief in western Europe last week following the restoration of gas through the Nord Stream 1 pipeline after a scheduled outage hasn’t lasted very long.

Russian energy giant Gazprom announced late Monday that gas flows to Germany through this major pipeline would fall to 33 million cubic meters per day from Wednesday. That’s half of the flows seen at the end of last week, which are already only 40% of normal capacity.

European Union countries are set to hold an emergency meeting later Tuesday to discuss a proposal to curb their gas demand as they try to reduce their dependence on Russian energy, especially given the likelihood of a total cut-off as Moscow uses its energy supply as a political weapon as winter draws nearer.

Germany’s Economics Minister Robert Habeck warned on Monday that the country, which relies heavily on Russian gas, faces a serious energy situation.

5. Oil gains; API supply data due

Crude oil prices rose Tuesday for the second day in a row on concerns over Europe’s energy supplies after Russia reduced the amount of gas flowing into Germany through the Nord Stream 1 pipeline [see above].

Yet, despite these gains, oil prices are over 10% lower this month on the expectation that interest rate hikes, by the Federal Reserve, in particular, will reduce economic activity and thus impact fuel demand growth.

U.S. crude supply data from the American Petroleum Institute, due later in the day, could provide an indication of reduced U.S. demand, even in the middle of the driving season.

By 06:00 AM ET, U.S. crude futures were up 2% at $98.64 a barrel, while Brent crude was up 2% at $102.16 a barrel. Both benchmarks gained approximately 2% last session.