Walmart’s stock plunged 6.5%. Treasury yields dipped, and rate cut hopes seemed to slip further away. Today was rough for investors, with markets pulling back after a record-breaking run.
After hitting all-time highs earlier this week, the S&P 500 slipped 0.4%, the Dow dropped 1%, and the Nasdaq fell 0.5%. The biggest drag? Retail stocks got slammed, led by Walmart’s surprise warning on future profits, which spooked investors already jittery about inflation, consumer spending, and the Federal Reserve’s next move.
Walmart’s Earnings Shock: A Profit Forecast That Stung
On the surface, Walmart’s earnings weren’t bad at all. The retail giant beat expectations with strong quarterly profits, showing it can navigate high inflation and shifting consumer habits. But instead of celebrating, investors dumped Walmart’s stock after issuing a weaker-than-expected profit forecast for 2025.
Why? Because the company isn’t just looking at past success—it’s signaling what’s ahead. And what Walmart sees isn’t pretty:
Inflation is still eating into consumer spending. Even though prices aren’t rising as fast as before, shoppers still feel the pinch. Don’t worry – I won’t go into a cost-of-eggs rant like everyone else.
Tariff concerns are back. With Donald Trump, the possibility of new tariffs on Chinese goods is very real, and announcements happen seemingly every day, even if they are used as a negotiation tactic. The issue is Walmart, which relies on global supply chains, could see its costs increase if trade tensions escalate.
Consumer demand is shifting. More shoppers are cutting back on discretionary items and sticking to essentials—great for groceries but not for everything else.
Walmart’s cautious outlook rattled the entire retail sector:
Costco (COST): -2.6%
Target (TGT): -2%
Amazon (AMZN): -1.7%
The selloff in these stocks tells us one thing: Investors are nervous about the future of retail—especially if the economy slows down more than expected.
The good news is the S&P 500 is still in a strong bullish pattern.
Palantir’s Defense Budget Nightmare
Another big loser today? Palantir Technologies (PLTR), down 5.2%, extending a 10.1% drop from yesterday. The reason: U.S. Defense Secretary Pete Hegseth announced a $50 billion defense budget cut next year.
Why does that matter? Because 55% of Palantir’s revenue comes from government contracts. If the Pentagon is looking to tighten spending, Palantir—and other defense contractors—could take a major hit.
This stock had been on a massive AI-driven rally, with investors betting on its deep ties to government security and intelligence. But now, those contracts aren’t looking as bulletproof as before.
Who Won the Day? The Stocks That Survived the Selloff
While most of the market was in the red, a few names stood out:
📈 Shake Shack (SHAK) soared 11.1% after reporting stronger-than-expected profits. CEO Rob Lynch acknowledged that bad weather and California wildfires hurt foot traffic, but overall demand remained solid.
📈 Baxter International (BAX) jumped 8.5% thanks to strong sales in pharmaceuticals and medical products. Investors love defensive plays in uncertain times, and Baxter delivered.
📈 Alibaba (BABA) surged 8.1% after a strong earnings report and positive developments in AI expansion. China’s e-commerce giant is making a major AI push, and investors are taking notice.
These gains weren’t enough to lift the overall market, but they show that there are still pockets of strength—especially in healthcare, food, and tech.
I’d also argue there is strength in Utilities, as shown by the ETF, XLU:
What’s the Fed Thinking? Interest Rates, Inflation, and Market Volatility
Right now, one of the biggest question marks in the market is what the Federal Reserve will do next. Investors have been banking on multiple rate cuts this year to boost economic growth for months. But that’s starting to look less certain.
Today’s jobless claims report added more uncertainty. The Labor Department reported 219,000 new claims, slightly higher than expected. While not a crisis, it does signal that the labor market could be softening—which could influence the Fed’s decisions.
At the same time, Treasury yields moved lower, reflecting some investor caution:
📉 10-year Treasury yield: 4.50% (down from 4.54%)
📉 2-year Treasury yield: 4.27% (unchanged)
Lower yields suggest that some traders still expect rate cuts, but the overall sentiment is shifting. The Fed has to balance keeping inflation in check while avoiding a deep economic slowdown. And Trump’s proposed tariffs could throw another wrench into the mix—potentially pushing inflation even higher.
The Bottom Line: A Market in Transition
Today’s selloff wasn’t panic selling—but was it a wake-up call?
The market has been on a historic run, fueled by AI optimism and rate-cut expectations. But now, are cracks are starting to show:
🔸 Retail stocks are struggling as consumer spending shifts.
🔸 Defense stocks are on edge due to budget uncertainty.
🔸 The Fed isn’t cutting rates as fast as traders hoped.
None of this means the bull market is over—but it does mean volatility is back. Expect more sharp moves as investors digest earnings, economic data, and the ever-evolving political landscape in the weeks ahead.
The easy money might be over. The real market battle starts now.
I will see you in Florida in Investor’s Blueprint Live, and we’re going to have all sorts of ways you can win the upcoming market battle!! 🚀
