The spirit of discount-hungry shoppers is harder to break than many feared it would be.

As inflation eased over the past few months while the Fed kept interest rates high, some economists worried that consumers would buckle under the pressure, especially as the labor market lagged.

But today’s retail sales report, along with earnings from consumer bellwether Walmart, proved that even though shoppers are more budget-conscious, consumer sentiment is bending, not breaking.

Walmart signals a soft landing

Walmart posted a smash hit of a quarter, beating analyst expectations in both earnings per share and revenue.

• The big box retailer raised its full-year outlook, and said it now expects sales to climb by 3.75% to 4.75% for the full year. Its previous guidance predicted growth of 3% to 4%.
• Sales in the company’s general merchandise category were positive for the first time in 11 quarters.
• “Importantly, we don’t see any additional fraying of consumer health,” Chief Financial Officer John David Rainey told CNBC.
• Shares climbed TK% on the news.

And the consumer renaissance spread beyond just America’s biggest retailer.

• The Commerce Department reported advanced retail sales increased 1% in July, better than analyst expectations of 0.3%.
• Excluding autos, sales jumped 0.4%, far better than the 0.1% analysts projected.

The good news? Economists forecast the US will successfully pull off a soft landing, avoiding a devastating slowdown. The not-so-good news? Consumers might have a few more months of tightening budgets as the pressure builds.

“The US consumer is still spending but doing so more selectively amid less vibrant labor market conditions and as some households increasingly feel the pinch from higher prices and borrowing costs,” explained EY Senior Economist Lydia Boussour. “We expect consumers’ prudence will increase in the coming quarters as elevated prices and interest rates take a growing toll on the labor market and household’s finances.”

So next time you end up wandering the aisles with more in your shopping cart than was on your original list, remember you aren’t just purchasing an unsettling human hand throw pillow, but doing your part to veer the economy away from a recession.—LB

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If you’re not following Brew Markets on X, first of all, shame on you. Second, you’re missing out on a succinct summary of a strong series of economic data from the last few days like the one above.

TLDR: Manufacturing and consumer prices didn’t rise nearly as much as economists were worried about, jobless claims came in way lower than predicted, and today’s retail sales were a slam dunk. All in all, the economy seems to be standing on firmer footing than we thought it was just last week, which just goes to show that keeping your cool in times of market volatility tends to pay off down the road.

The Chinese e-commerce behemoth Alibaba missed earnings and revenue expectations, causing its stock to plummet tk% today. The company’s revenue came in at $34.01 billion versus the $34.7 billion expected from analysts, while its earnings per share came in at $0.29, versus the $2.08 expected—a miss of about 86%. The Chinese company struggled with lowered consumer demand in China while the country faces an economic slowdown, plus fierce competition from rivals such as JD.com and Temu.

Cisco Systems surprised investors on the upside, beating expectations on both earnings per share and revenue, driving shares up tk%. The tech company’s revenue came in at $13.64 billion, topping analyst forecasts of $13.56 billion, but still fell year over year. Chief Executive Chuck Robbins said in a statement that consumers flocked to Cisco in the “era of AI.” The firm also disclosed it was going through a restructuring that would reduce its workforce by 7%.

Flutter, the sports betting company that operates FanDuel, smashed earnings expectations, propelling the stock up tk% today. Revenue of $3.61 billion marked a 20% year over year increase and beat analyst expectations of $3.40 billion. Earnings per share came in at $2.61, far outpacing expectations of $1.47. The firm also raised its full-year guidance, estimating revenue will reach $6.2 billion by the end of 2024, higher than the $6 billion it had previously forecast. CEO Peter Jackson noted that sports betting during the NBA playoffs helped supercharge the firm’s financial results last quarter.

It’s an automation celebration. We’ve come a long way since the days of “placing orders” with brokers over the phone. Today, Betterment makes it easy to put your money to work. Automated tech tools, such as portfolio rebalancing and dividend reinvestment, can help maximize your returns. Cheers to that. Learn how Betterment can help your $$ grow.

• Following the crowd isn’t usually a good idea—unless that crowd is composed of the best investors on Wall Street.
• Here’s why the Jackson Hole conference next week is a big deal for investors.
• The Fed only controls one interest rate, but it has enormous implications for all the other interest rates you encounter on a daily basis.
• One in every three homebuilders is cutting prices as sentiment sinks to an eight-month low.
• Hackers stole personal data from 2.9 billion Americans, including a boatload of Social Security numbers, back in April.
• The one stock to buy in a market downturn.

Tomorrow brings us some key real estate data. The building permits and housing starts reports will both reveal whether companies are beginning to build more residential homes or if they’ve slowed their production.

Meanwhile, we’ll hear more about consumers with the University of Michigan’s consumer sentiment survey. While a lot of the recent data has shown improvements to the state of the economy, this survey will tell us whether or not the average American actually feels like things are getting better.

Before the open

• Berkshire Hathaway (BRK.A, BRK.B) is a must-watch earnings report, simply because it provides insight into the mindset of the greatest investor of all time. Warren Buffett has been a big buyer of Japanese stocks lately, though the unwinding yen carry trade may have put a damper on his returns. Plus, he’s recently sold out of Apple and bought more Occidental Petroleum. And shareholders will want to hear more about how he’s approaching recent market volatility. Consensus: Varies depending on share class.

After the close

• Flowers Foods (FLO) makes delicious baked goods, but it doesn’t make much money. Shares popped earlier this summer then flatlined as investors realized that the low-growth, low-margin business coupled with lower consumer spending is a deadly combination. Shareholders will want to hear more about management’s plans for how to translate decent revenue growth into a stronger bottom line in the quarters ahead. Consensus: $0.33 EPS, $1.24 billion in revenue.

Yesterday, we asked you all how you were feeling about the state of markets these days, and the responses we got were enlightening, to say the least.

Sentiment among our readers was evenly mixed, with 49.4% of you telling us that recent market volatility has made you “greedy,” while 50.6% are “fearful.” That said, only one out of every three readers has sold any investments in August, with a full two-thirds of readers responding that they had in fact bought investments this month.

As for what you’re investing in, 74.6% of respondents said they bought stocks this month, while 8.1% bought bonds and 5.9% bought crypto, with the rest evenly dispersed among ETFs, or some mix of all of the above.

The vast majority of investors making purchases this month bought tech stocks, with energy stocks firmly in second place. Consumer staples, financials, and utilities rounded out the top five.

Finally, it was great to learn more about your favorite investments and what you’d like us to cover more of in the newsletter. There were a ton of investments we hadn’t even considered, and your feedback about the newsletter is going to help us plan future markets coverage.

No snarky jokes here, just a bit of sincerity: Thanks for keeping the lines of communication open with us, we’ll be taking your advice and ideas to heart for future editions!—MR