The rich are shopping at Walmart — and 3 other big themes this week

This week’s newsletter is by Myles Udland, Head of News at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn. Read this and more market news on the go with the Yahoo Finance App and subscribe to the Yahoo Finance Morning Brief here.

Consumers continue to trade down by shopping at Walmart (WMT).

On the company’s latest earnings call, Walmart CEO Doug McMillon noted more than half the market share gains made by the company in its latest quarter came from higher income shoppers.

The company also noted spending on groceries continues to comprise a larger portion of overall sales as what it called “stubborn” inflation in the grocery aisle eats into household budgets.

The obvious economic read-through from this trend is that consumers feel less confident that otherwise strong data might suggest. As the largest retailer — and largest private employer — in the country, what happens in at Walmart does not stay at Walmart, economically speaking.

On the other hand, a great story this week from Bloomberg’s economics team about wage growth and how expectations change made us wonder if perhaps Walmart’s comments are less dire than they seem.

As one business owner told Bloomberg regarding restaurant wages that have gone from $12/hour pre-pandemic to $17/hour today: “You’re never going to unring that bell.”

For shoppers, the same can be true.‌

As inflation bit last year, most notably at the pump, consumers across income brackets found themselves for the first time in two generations looking for ways to make real savings in the most non-negotiable part of a household budget: food.

As inflation pressures ease, or wage gains continue, or economic confidence generally returns, we wonder if higher earners shopping at Walmart are simply content to continue realizing these savings in the grocery aisle and applying them elsewhere.

Yahoo Finance’s Brooke DiPalma noted this week the continued spending growth at restaurants and bars as experiences come back in favor with the fading of pandemic fears.

Story continues

No matter how large or small your paycheck might be, no one likes spending more than they have to. And that might be the bell Walmart rang for grocery savings during the pandemic. And the one the company continues to ring today.

Three big themes this week

Jeffrey Gundlach tells Yahoo Finance stocks remain in a bear market

Yahoo Finance Executive Editor Brian Sozzi sat down with DoubleLine Capital CEO Jeffrey Gundlach this week, and among other highlights from a wide-ranging conversation Gundlach reminded viewers the U.S. stock market is in a “protracted bear market.”

“It started, really, in the fourth quarter of 2021,” Gundlach said. “[It’s] very negative for the stock market when you have rising interest rates against these valuations, especially real interest rates.”

Find more on Sozzi’s top takeaways from his discussion here.

The ‘trash’ rally under pressure

This week, Yahoo Finance’s Jared Blikre and Julie Hyman each took a look at this year’s market rally and the defining trade that appears to be imperiled — so-called “trash” stocks.

As Julie noted, a basket of stocks favored by retail investors tracked by Goldman Sachs has outperformed this year. RBC’s similar basket of what it calls “trash” stocks, or those defined by negative cash flow, net losses, and net debt — many of which were favorites during the pandemic — has also outperformed the market‌.

But as RBC’s Amy Wu Silverman told Yahoo Finance, the fundamental picture for many of these names hasn’t changed. “These are still low-quality names facing what is a pretty abrasive environment,” Wu Silverman said.‌

Names like Carvana (CVNA), Bed, Bath & Beyond (BBBY), and C3.ai (AI) each lagged the Nasdaq this week.

Nvidia to the rescue?

On the flip side of a hot trade losing steam this week was Nvidia (NVDA).‌

The chip giant reported results after the close on Wednesday that beat expectations, and shares gained more than 14% during Thursday’s trading session. Through Thursday’s close, the stock was up 61% year-to-date. From its recent lows reached in Oct. 2022, NVDA has more than doubled.

After navigating the recent challenges of a pullback in crypto-related spending on chips and renewed caution in the tech industry, Nvidia is now capitalizing on the newfound love for AI and the compute power needed to meet this industry’s future.‌

“AI is at an inflection point, setting up for broad adoption reaching into every industry,” Nvidia CEO Jensen Huang said this week. “From startups to major enterprises, we are seeing accelerated interest in the versatility and capabilities of generative AI.”

Chart of the week

Warren Buffett will release his latest annual letter to Berkshire Hathaway shareholders Saturday morning, and by far the biggest holding of Berkshire’s stock portfolio is Apple (AAPL).

At the end of last year, the tech giant was nearly 40% of Berkshire’s securities portfolio. In his 2021 letter to shareholders, Buffett called Apple one of the company’s “Four Giants” and noted its 5.55% ownership of the iPhone maker saw Berkshire rake in $785 million worth of dividends and an unrealized $5.6 billion cut of Apple’s profits.

“Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple products as his first love,” Buffett wrote, “but all of his other constituencies benefit from Tim’s managerial touch as well.”