By one metric, consumer mood is at a 29-month low as a result of the market collapse brought on by President Donald Trump’s trade war and the continued high prices.
However, during this fourth-quarter earnings season, executives have been discussing artificial intelligence more than inflation on calls with Wall Street investors.
230 firms cited “inflation” over the last three months’ S&P 500 SPX company earnings calls, according to a FactSet study of those calls. That’s the second-lowest number since the second quarter of 2021, but it’s still higher than the number of corporations that brought up the subject during fourth-quarter calls for 2023 and 2022.
Meanwhile, the FactSet investigation released Friday found that 241 organizations used “AI” in those calls. In the last ten years, that is the largest number that has been tracked.
Discussions on earnings calls are taking place in the midst of what one analyst has referred to as a “crisis of confidence” surrounding AI stocks, as concerns about competition, the enormous sums of money invested in the technology’s development, and the size of the potential returns have replaced the exuberant expectations.
Even if tariffs hurt consumers in the short term and make it more difficult for businesses to plan and estimate their finances, Trump thinks that they will help secure U.S.-friendly trade agreements and bring back American manufacturing jobs. Economists are concerned that businesses may hike prices in order to pass on the import duties to consumers who are already struggling.
In light of this, executives have recently been less enthusiastic about the possibility of a recession. However, they have observed the deteriorating atmosphere.
Speaking at a conference last week, Ed Bastian, the CEO of Delta Air Lines Inc. (DAL), stated that the airline’s sales growth had slowed following a snow and ice storm in Atlanta, the destination of its largest hub; the fatal midair collision between an American Airlines (AAL) flight and a military helicopter in January; and a Delta crash in Toronto in February. However, he said that there were more reasons.
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“It became pretty quickly obvious to us, too, [that] there was more than just the consumer sentiment coming out of the incidents,” Bastian stated. “There was something going on with economic sentiment, something going on with consumer confidence, and we were seeing that very much in the close-in bookings.”
Richer shoppers, who have been less affected by inflation in recent years, have also been hit hard, according to Tony Spring, CEO of Macy’s Inc. (M).
During the department store chain’s earnings call this month, he stated, “I think the affluent customer that’s shopping [at] Macy’s is just as uncertain and as confused and concerned by what’s transpiring.”
According to research firm Coresight’s head of global research, John Mercer, told MarketWatch that since mid-January, consumer optimism has declined more precipitously among those earning over $100,000, who typically have more money invested in the stock market, than among those with lower incomes, who have been experiencing a longer period of decreased security following three years of sharp price increases.
“High-income groups are more insulated from the pressures of inflation on essentials,” he stated. However, they are more inclined to react when asset prices—like the stock market—change negatively. That can also be the cost of a home.
This week’s profits
As chains have cautioned about uncertainty among consumers across the income spectrum, more retailers, such as Five Below Inc. (FIVE), J.Jill Inc. (JILL), and Ollie’s Bargain Outlet Holdings Inc. (OLLI), are reporting this week. Other companies that report include Lennar Corp. (LEN), Micron Technology Inc. (MU), Darden Restaurants Inc. (DRI), and General Mills Inc. (GIS).
The call that you should schedule
Nike: Some analysts believe Nike Inc.’s stock (NKE) has essentially bottomed out after a 28% decline over the last 12 months due to a combination of an overabundance of vintage sneakers and a general decline in demand. We’ll see if that’s the case when the shoe and athletic clothing manufacturer releases its quarterly results on Thursday. Elliott Hill, the business’s new CEO, is working to put athletes’ needs first, and the company is collaborating with Kim Kardashian to try to turn things around. However, not all celebrity partnerships are guaranteed to succeed.
The number to keep an eye on
FedEx’s earnings, sales, and prospects: The demand for shipping can serve as a stand-in for the overall state of the economy to some extent. Given the volume of parcels FedEx Corp. (FDX) transports worldwide, its performance and outlook may provide more insight into the depth of consumers’ present hesitancies. Due Thursday, the figures will also come after months of cost-cutting measures by the corporation, which announced in December that it would spin off its freight division.
