The Dow Jones Industrial Average (DJINDICES:^DJI) was little changed by late Thursday morning following a disappointing unemployment report from the Labor Department. Initial claims for state unemployment benefits came in at a seasonally adjusted 1.106 million for the week ended Aug. 15, up from a revised 971,000 in the previous week. The Dow was down about 0.08% at 11 a.m. EDT today.
Intel (NASDAQ:INTC) was the Dow's best performer, rising after the chip giant announced that it was resuming share buybacks. Meanwhile, the stock of Walmart (NYSE:WMT) continued to sink following the retailer's second-quarter report earlier this week.
Intel resumes buybacks
When the coronavirus pandemic was in its early stages in March, Intel suspended its share buyback program, warning that its results could be materially affected. Other large companies took similar measures.
Intel hasn't taken much of a hit so far from the pandemic, at least in financial performance. Revenue soared 20% in the second quarter on strength in the data center business, and earnings per share shot up 16%.
What has taken a hit is the stock price. Intel announced along with its second-quarter report that chips based on its 7nm manufacturing process would be delayed. The company previously had trouble getting its 10nm process ready for mass production, opening the door for rival AMD to catch up by using a 7nm process from third-party foundry TSMC. Intel stock is now down around 17% year to date.
Intel will try to take advantage of its beaten-down stock price by restarting share buybacks. The company announced late Wednesday that it had entered into an accelerated share-repurchase program to buy back $10 billion of its stock. It plans to fund the repurchases with cash on hand, which has been buoyed by strong first-half results.
Intel is in a tough spot. AMD is once again competitive in the PC and server chip markets, and it's been consistently stealing share from Intel. The PC business, boosted by demand from those working from home during the pandemic, is almost certain to slow as the recession drags on. And the data center business could take a hit from customers slashing IT budgets due to economic uncertainty.
Shares of Intel were up 2.1% Thursday morning on the buyback news. Repurchases may help boost the stock, but the company will need to get its act together on manufacturing to slow AMD's market share gains.
Walmart continues to cool off
Walmart reported impressive second-quarter numbers earlier this week, but fears that the good times may be ending as economic stimulus wanes have sent the stock lower. Shares of Walmart were down 1.7% Thursday morning, bringing the total post-earnings loss to about 5%.
The company reported a 9.3% rise in U.S. comparable-store sales for the second quarter, driven by a near-doubling of e-commerce sales and a big jump in average ticket. The problem is that shoppers are visiting its stores far less frequently. The number of transactions at U.S. Walmart stores was down 14% in the quarter.
Combine less-frequent visits with the absence of economic stimulus, and you have a recipe for a slowdown. Walmart benefited in the second quarter from checks sent directly to Americans, as well as a $600 federal supplemental unemployment benefit. That unemployment boost has now expired, and Congress has yet to pass another stimulus bill.
As the stimulus faded, Walmart saw its sales growth slow. The company said in its earnings call that sales started to normalize toward the end of the quarter, with July comps up just 4%. Walmart should do fine during a long recession, given its focus on low prices and its operational efficiency. But it's certainly not immune to a weak consumer spending environment.
Walmart stock is still up about 10% this year, but without more stimulus, its sales bonanza is likely over.