Investment Rating - The report maintains a "Weaker than Market" rating for the U.S. stock market [1] Core Insights - After a pullback, the U.S. stock market has shown significant recovery, with small-cap stocks outperforming [3] - The S&P 500 index increased by 0.3%, while the Nasdaq decreased by 0.6% [3] - Among 18 sectors, 12 experienced gains, with notable increases in banking (+3.2%), automotive (+2.9%), and energy (+2.8%) sectors [3] Price Trends - Small-cap value stocks (Russell 2000 Value) rose by 4.1%, outperforming small-cap growth (Russell 2000 Growth +2.6%) and large-cap value (Russell 1000 Value +1.7%) [3] - The report highlights that 18 sectors saw price increases, while 6 sectors faced declines, with the largest declines in food and staples retailing (-2.0%) and software and services (-1.9%) [3] Fund Flows - The estimated fund flow for S&P 500 constituents was +1.7 billion USD this week, a significant decrease from +75.8 billion USD the previous week [4] - Notable inflows were observed in automotive (+11.0 million USD), diversified financials (+4.6 million USD), and banking (+3.8 million USD) sectors [4] - Conversely, significant outflows were recorded in software and services (-29.9 million USD) and semiconductor products and equipment (-7.7 million USD) [4] Earnings Forecast - The report indicates a 0.3% upward revision in the 12-month forward EPS expectations for S&P 500 constituents, following a 0.2% increase the previous week [5] - 21 sectors saw upward revisions in earnings expectations, with the semiconductor sector leading with a +1.2% increase [5]

Group 1: Home Depot - Home Depot is the leading home improvement retailer, known for its high sales and popularity among consumers and contractors [4] - Recent sluggish sales are attributed to homeowners delaying major projects due to high interest rates and inflation affecting spending power [4][5] - In the fiscal second quarter, same-store sales increased by 1%, with foreign currency translations negatively impacting results by 0.4 percentage points [5] - The company has consistently prioritized dividend payments, with a history of increasing payouts annually since 2010, even during economic downturns [6][7] - Home Depot generated $7.2 billion in free cash flow in the first half of the year, significantly exceeding the $4.6 billion in dividends paid [8] - The current dividend yield stands at 2.3%, which is over 1 percentage point higher than the S&P 500's yield of 1.2% [8] Group 2: Target - Target has been a popular shopping destination for basic and exclusive merchandise, but sales have been affected by high prices and recent boycotts related to management decisions [9][10] - The fiscal second-quarter same-store sales dropped by 1.9%, with lower traffic accounting for a 1.3 percentage point decline [11] - Target announced a 1.8% increase in its quarterly dividend to $1.14, maintaining a commitment to dividend growth since 1967, making it a Dividend King [12] - The company has a payout ratio of 52%, indicating it can comfortably sustain the increased dividend payments [12] - At the new dividend rate, Target's stock yields approximately 4.6% [12]

Company Overview - Home Depot is the leading home improvement retailer, operating over 2,300 stores across the U.S., Canada, and Mexico [1][4] - The company has faced challenges in expanding outside North America, resulting in fewer than one new location opened per month [2][6] Financial Performance - In the first half of 2025, Home Depot reported revenue of $85 billion, reflecting a 7% growth compared to the same period in 2024 [9] - Operating income grew by only 0.6% due to costs of sales and operating expenses rising faster than revenue [10] - Net income for the first two quarters of 2025 was $8 billion, a decrease of 2.2% year-over-year [10] Dividend and Valuation - Home Depot's current annual dividend payout is $9.20 per share, yielding 2.25%, which is above the S&P 500 average of 1.2% [12] - The company's price-to-earnings (P/E) ratio is just over 27, below the S&P 500 average of 30, but may be perceived as pricey given the slow growth [14] Future Outlook - Over the next five years, Home Depot is expected to provide rising dividends and higher returns, but not sufficient to outperform the S&P 500 [15] - The company is likely to benefit from slow, steady returns, but lacks meaningful growth prospects beyond inflation and population increases [16] - The rising dividend is expected to continue benefiting shareholders, but underperformance may lead investors to seek opportunities elsewhere [17]

Core Viewpoint - Dividend investing is highlighted as a strategy for generating passive income, with a focus on attractive yields in the consumer goods sector, specifically featuring Home Depot, JD.com, and Target as strong investment options. Group 1: Home Depot - Home Depot is recognized as a leader in dividend growth, with comparable-store sales increasing by 1.4% and revenue rising by 4.9% to $45.3 billion in the second quarter [3][4] - The company anticipates full-year revenue growth of about 5%, benefiting from potential interest rate cuts and a cooling labor market [4] - Home Depot is positioned to capitalize on a national housing shortage estimated at 4 million homes, offering a dividend yield of 2.3% [5] Group 2: JD.com - JD.com, China's second-largest e-commerce company, has seen its shares decline by 71% from previous highs, resulting in a dividend yield of 3.21% [6][8] - The company employs a direct-sales model, investing in its own inventory and utilizing a robust warehouse network for efficient delivery [7] - JD.com reported a 22% year-over-year revenue increase in the second quarter, with active customers growing by 40%, and is focused on improving supply chain efficiency through AI investments [8][10] Group 3: Target - Target's revenue fell by less than 1% year-over-year, with comparable-store sales down 1.9%, and earnings per share at $2.05, slightly beating expectations [11] - The announcement of a new CEO, Michael Fiddelke, has raised concerns about the company's direction, as the market anticipated an outsider for a fresh perspective [12][13] - Target has a strong dividend history, being a Dividend King with 54 consecutive years of annual increases, currently offering a high dividend yield of 4.5% [15]

Core Viewpoint - Home Depot has declared a new quarterly dividend of $2.30 per share, which has positively impacted its stock price, leading to a nearly 4% increase in trading, outperforming the S&P 500 index's 1.5% rise [1][2]. Dividend Announcement - Home Depot's board of directors announced a quarterly dividend of $2.30 per share, to be paid on September 18 to shareholders of record as of September 4, resulting in a dividend yield of 2.2% based on the recent closing share price [2]. - This marks the 154th consecutive quarter that Home Depot has paid a dividend, highlighting its commitment to returning value to shareholders [4]. Financial Performance - In the recent second-quarter earnings report, Home Depot reported a total revenue increase of nearly 5% year-over-year, although global same-store sales growth was modest at 1% [5]. - The company's performance was generally in line with analyst expectations, and management's positive comments regarding pricing and guidance contributed to favorable investor sentiment [5].

Federal Reserve and Economic Outlook - Jerome Powell's comments at Jackson Hole indicate a shift towards an easing stance, surprising many investors who anticipated a more cautious approach [5][6][9] - The labor market's actual job growth was revealed to be significantly weaker than previously thought, with only 35,000 jobs added per month instead of the expected 150,000 [5][6] - Markets are now pricing in a full easing cycle, with speculation about multiple rate cuts in 2025 and beyond [10][11] Retail Sector Performance - Walmart reported a revenue beat driven by a 25% increase in e-commerce sales but missed on earnings due to tariff-related costs, leading to a 4% decline in stock price [12][13] - Home Depot also missed earnings expectations and indicated plans to raise prices due to tariffs, despite a slight increase in stock price following its earnings report [14][15] - The retail sector is facing margin pressures from increased tariffs, prompting strategic price adjustments [13][15] Technology Sector Insights - NVIDIA is set to report earnings next week, with ongoing debates about its valuation versus long-term growth prospects in the AI sector [16][18] - The stock has experienced significant appreciation over the past few years, raising concerns about its ability to maintain growth rates [16][18] - Other AI-related stocks, such as Palantir, Oracle, and AMD, have seen recent declines, indicating potential skepticism about the sustainability of their growth [23][24][25] Upcoming Earnings and Market Reactions - A number of high-profile retailers are expected to report earnings next week, including Dollar General and Abercrombie and Fitch, which will provide further insights into the retail landscape [26] - The bond market is anticipated to react strongly to Powell's upcoming speech, which may influence interest rates and investor sentiment [22]

Core Insights - Retailers are facing rising tariff costs but have managed to avoid significant price hikes for consumers so far [2][3][5] - Consumer spending remains steady, with some retailers reporting healthy sales of discretionary items [8][11][12] - Companies are employing various strategies to mitigate the impact of tariffs, including diversifying sourcing and adjusting pricing carefully [16][20][28] Group 1: Retail Performance - Walmart and Tapestry have raised their sales outlooks for the year, indicating strong consumer demand for discretionary items [8][12] - Sales of fashion items at Walmart accelerated, with specific high-demand products selling out quickly [9][29] - Lower-income shoppers are more sensitive to price changes, affecting their purchasing behavior [11][12] Group 2: Tariff Impact and Mitigation - Retailers have absorbed some tariff costs while passing others onto consumers, but the overall impact has been less severe than anticipated [5][21][30] - Companies like Home Depot and Lowe's are focusing on home professionals to stabilize traffic amid uncertain consumer spending [25][26] - Walmart has benefited from diversified revenue streams, including a 46% growth in global advertising [26][28] Group 3: Strategic Adjustments - Retailers are importing goods from a wider range of countries and stocking up on high-frequency purchases to mitigate tariff impacts [16][20] - Some brands, like Birkenstock and Coach, have successfully increased prices without losing customer demand [29][30] - Companies are adjusting inventory strategies, with Crocs reducing orders and swapping out older inventory for fresher styles [32]

Core Viewpoint - Home Depot is experiencing a recovery in same-store sales, marking three consecutive quarters of positive growth in the U.S. market, indicating a potential turnaround for the company [1][4][10]. Group 1: Same-Store Sales Performance - Home Depot's same-store sales had declined for eight consecutive quarters before showing improvement, with a 1.4% growth in fiscal Q2 [3][4]. - The company reported a 1.0% increase in global comparable-store sales during the same period [4]. - The average ticket size increased by 1.4%, although the number of transactions fell by 0.4% [5]. Group 2: Revenue and Earnings - Total revenue for Home Depot rose by 4.9% year-over-year to $45.28 billion, while adjusted earnings per share (EPS) increased to $4.68, missing analyst expectations [9]. - The company maintained its full-year guidance for a 2.8% sales growth and a 1.0% increase in same-store sales, alongside a projected 2% decline in adjusted EPS [9]. Group 3: Product Categories and Consumer Behavior - 12 out of 16 product categories recorded positive same-store sales growth, with 13 out of 16 in the U.S. also showing improvement [7]. - Sales of big-ticket items (costing $1,000 or more) increased by 2.6%, driven by strength in building materials, lumber, and hardware [6]. - Economic uncertainty is causing consumers to delay larger discretionary projects, impacting sales in areas like kitchen and bathroom remodels [6]. Group 4: Market Outlook - The Leading Indicator of Remodeling Activity (LIRA) suggests an improving home remodeling market over the next 12 months, although challenges remain [11]. - Home Depot's stock trades at a forward price-to-earnings (P/E) ratio of about 27 times fiscal 2025 estimates, which is considered high given the current economic uncertainty [13]. - Despite operational improvements, the stock may remain range-bound without significant breakout potential in the near term [14].

Group 1 - Home Depot holds strong competitive advantages that have persisted over the long term [1] - The company provided an investor update that could positively influence perceptions of its future prospects [1]

Group 1 - Major U.S. retailers, including Walmart and Home Depot, express optimism about consumer resilience despite potential challenges from rising prices due to tariffs [1][2] - Walmart raised its full-year performance expectations based on strong sales momentum, while Home Depot reported that customer spending remains "very healthy" [1] - Target's sales are still declining year-over-year, but the performance is better than expected, indicating a mixed retail environment [1] Group 2 - Retailers are facing increased costs as new inventory is subject to higher tariffs, which may lead to price increases in the latter half of the year [2][3] - The impact of price increases is uncertain, as retailers have different strategies for passing on costs to consumers [2] - Consumers are becoming more price-sensitive, seeking value through second-hand stores and private label products, indicating a shift in spending behavior [3] Group 3 - Analysts predict that inflation will accelerate in the second half of the year as retailers deplete pre-tariff inventory and pass on more costs to consumers [3][4] - The holiday shopping season is expected to be subdued due to rising essential goods prices, which will limit disposable income for budget-sensitive consumers [3]