Joey Solitro
A big-box bellwether reported strong fourth-quarter earnings but offered weak full-year guidance on Thursday, a follow-up to a soft January retail sales report that could further undermine faith in the U.S. consumer as an engine of global economic growth. Meanwhile, President Donald J. Trump is carving a new, new world order complete with budget cuts at the Pentagon and a corresponding impact on defense stocks.
And then there was St. Louis Fed President Alberto Musalem in a speech at the Economic Club of New York raising a specter any presidential administration is loath to contemplate: stagflation.
"An alternative and plausible scenario in which inflation ceases to converge, or rises, at the same time the labor market weakens must also be considered," said Musalem, a voting member of the Federal Open Market Committee. Musalem said his base-case scenario is continuing slow improvement in inflation and a healthy labor market.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Former St. Louis Fed President Jim Bullard told MarketWatch the alternative scenario Musalem describes would put the Fed in a bind vis-à-vis its dual mandate of maintaining both price and labor-market stability. "I think they probably lower rates, because they would argue that a slower economy would naturally bring the inflation rate down a little," Bullard observed.
At the closing bell, the blue-chip Dow Jones Industrial Average was down 1% to 44,176. The broad-based S&P 500 Index, coming off an all-time closing high on Wednesday, shed 0.4% to 6,117. The tech-heavy Nasdaq Composite was off 0.5% to 19,962.
Walmart sees sales slowing
Walmart (WMT) stock fell 6.5% and was the worst-performing Dow Jones stock after the retailer beat top- and bottom-line expectations for its fourth quarter but issued a soft outlook for fiscal year 2026.
Following last week's report of softer-than-expected retail sales data for January, Walmart's forecast invites more questions about the health of the U.S. consumer.
The fact that WMT boosted its dividend by 13% – the biggest payout bump in more than a decade – suggests management maintains some confidence in its future prospects. It also means Walmart is one of the best dividend stocks to buy for dependable growth.
As Jay Woods of Freedom Capital Works notes, WMT stock was trading at a price-to-earnings ratio of 37.3 times vs a five-year high of 37.9. And following a stellar performance in 2024 – a total return of 74% vs 25% for the S&P 500 – the retail stock is up more than 15% this year, more than tripling the index's gain. For WMT to move higher from here, according to Woods, would have required "one heck of a beat."
Bernstein analyst Ivan Holman noted that though investors were prepared for management's "conservative guidance, this is a more muted outlook than investor feedback into earnings had suggested."
“We don’t want to get ahead of ourselves," said Chief Financial Officer John David Rainey during Walmart's conference call. "There is certainly some unpredictability in any environment that we have, but we feel really good about our ability to navigate that.” Rainey also noted that consumers are "very consistent" and "resilient."
Trump's new, new world order
Palantir Technologies (PLTR) stock fell 5.2% on Thursday after a 7.9% decline on Wednesday as investors priced in fresh reports on how the Trump administration plans to reposition the U.S. on the global stage. The AI stock is still up nearly 360% over the trailing 12 months.
Price action for defense stocks that haven't enjoyed a similar AI bounce was more muted, with Lockheed Martin (LMT, +0.8%), Northrop Grumman (NOC, +1.2%) and General Dynamics (GD, +0.8%) posting solid gains after a spokesman for President Trump clarified that the commander in chief has asked for $50 billion in cuts to the fiscal 2026 budget to help fund border security and drones.
Palantir – a data analytics company with more than a billion dollars worth of contracts with the U.S. Army and the Department of Defense – also disclosed that CEO Alex Karp plans to sell nearly 10 million PLTR shares.
"President Trump has dramatically shifted the direction of U.S. foreign policy in four short weeks," writes Alexandra Ward of The Wall Street Journal, "making the U.S. a less reliable ally and retreating from global commitments in ways that stand to fundamentally reshape America's relationship with the world."
At the same time, Dan Lamothe, Alex Horton and Hannah Natanson of The Washington Post report that Defense Secretary Pete Hegseth "has ordered senior leaders at the Pentagon and throughout the U.S. military to develop plans for cutting 8 percent from the defense budget in each of the next five years."
Nevertheless, Wedbush analyst Daniel Ives says the "sell-off represents another opportunity with PLTR generating traction across both federal and commercial for its entire portfolio." Ives reiterated his Outperform rating (equivalent to a Buy) and his $120 price target for PLTR, which represents 13% upside from Thursday's closing price.
Alibaba gets an AI boost
Alibaba Group Holding (BABA) stock rose 8.1% after the Chinese technology giant beat top- and bottom-line expectations for its fourth quarter.
"This quarter's results demonstrated substantial progress in our 'user first, AI-driven' strategies and the re-accelerated growth of our core businesses," said CEO Eddie Wu.
"The AI era presents a clear and massive demand for infrastructure," Wu added, noting that Alibaba "will aggressively invest" in the opportunity.
Related content
- When Is the Next Fed Meeting?
- Best Blue Chip Stocks: 21 Hedge Fund Top Picks
- What Are Covered Calls and Why Should Investors Use Them?
-
The Most Popular Apps for Retirement Planning in 2025A J.D. Power survey ranks retirement planning apps based on customer service and satisfaction. Does your financial app make the cut?
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams NowBeyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for RetirementSaving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial ExpertHealth care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
I'm a Financial Planner: Could Partial Retirement Be the Right Move for You?Many Americans close to retirement are questioning whether they should take the full leap into retirement or continue to work part-time.
-
From Mortgages to Taxes to Estates: How to Prepare for Falling Interest RatesAs speculation grows that the Federal Reserve will soon start lowering interest rates, now is a good time to review your financial plans for housing, estate, taxes, investing and retirement to make the most of potential changes.
-
This Is How Lottery Winners Build Lasting Legacies, From a Financial ProfessionalWinning a massive lottery jackpot, like the recent $1.4 billion Powerball, requires seeking immediate legal and financial counsel, protecting your identity and winnings and planning your legacy.
