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Walmart (WMT) reported a surprisingly bad quarter Tuesday morning as margins were crushed by inflation and supply chain issues. The top line was fine with US comps excluding fuel +3% but Operating Margin of 3.8% was down from 5.0% a year ago resulting in a 23% hit to EPS. As a result, WMT reduced its full-year EPS guidance from a mid-single-digit increase to a 1% decline. Nevertheless, WMT is still the best retailer out there for stagflation and the stock will bounce back.

Powell's overarching message today: "Truthfully, this is not a time for tremendously nuanced readings of inflation. We need to see inflation coming down in a convincing way. That is what we need to see. Until we see that, we are going to keep going." https://t.co/k7IiIxYLXx

— Nick Timiraos (@NickTimiraos) May 17, 2022

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In the afternoon, Fed Chair Powell gave an interview to the WSJ’s Nick Timiraos in which he reiterated the hawkish stance he’s been expounding for the last month. Notably – after an initial wobble – stocks moved higher into the close to finish at the highs of the day. This suggests to me that another 50 basis point rate hike in June is priced in and sets the stage for more upside in the short term.