Macro-economic warning from retail giant Walmart

Walmart (WMT) shares plunged by up to 10% – $20 billion in market cap – on October 14, 2015, the group’s biggest loss in 27 years. WMT had to raise average salary and to invest in e-commerce lately, yet it has been a surprise for every financial analyst when WMT announced its earnings in fiscal year 2017 will be down 6 to 12% instead of up 5% as initially forecast. Adapting WMT business model to new economic realities, like e-commerce, cannot explain everything here.

Does such a volatile move by Wall Street highlight fears of a longer slowdown in sales, in line with a growing risk on world’s economic growth – impacting the US finally – because of a constant feed of bad news from China? Indeed, according to the US Department of Commerce, retail sales were softer than expected and the shares of all other retailers slipped too as a result. Simultaneously, though it is not the same sector, Twitter (TWTR) shares also weakened this week despite announcing it will cut 10% of its workforce and Netflix (NFLX) lost almost 15% of its total valuation before catching up after it announced it has missed earnings per share estimates by $0.01 for Q3 2015.

So far the Q3 earnings have shown results in line with expectations, but fewer have beat estimates in comparison with Q2 2015 which could be further indication the economic environment will be less positive in the near future with less inflation – and thus deflation? – and less growth in the United States. Analysts project profits for S&P 500 members dropped 7.2% in the Q3. These developments are taking place in a more uncertain global environment increasingly worried by hesitant Fed’s monetary policy and the war in Syria. The situation seems serious enough that a growing number of analysts think a QE4 rather than a rate hike is getting more likely.