Nike Says Inventory Problem Is Gone, Stocks Spike Across the Board

Nike's inventory is finally going back to normal. That's good news for investors as the Dow Jones posts huge gains to start the day.

Sportswear company Nike recently told shareholders it’s finally shaken off its lingering inventory issues. Earlier this year, Nike’s stock price dropped considerably on the news that it had a massive overstock of inventory owing to over-ordered items in the wake of 2020’s massive demand. Now, it’s finally looking ahead after getting its inventory back to normal–and the company’s stock price is surging in response.

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The stock market across the board is enjoying a banner day after a brutal start to the week. Recent reports indicate that the economy could be in a better position than some oversold investors assumed. Now, the three major indexes are surging on the news that the long-feared recession might not materialize. 

Read More: Check out the latest Mind Your Dollars stock and financial news.

If the whipsaw performance of the stock market hasn’t made you nauseous yet, wait until you see housing prices. Home sales sank another 7% in November, according to recent data. This is the tenth consecutive month of declines in the sector, with home sales down an astonishing  35.4% year over year. It turns out the Fed’s high interest rates are playing havoc with the housing market, and time will tell how much longer the market can take it.

Nike Inventory Issues Abate

Nike says its inventory issues are finally a thing of the past. “We’re executing in the areas we spoke to 90 days ago as we take decisive action to clear excess inventory,” John Donahoe, Nike CEO and president, said during an investor call yesterday. “We believe the inventory peak is behind us. The actions we’re taking in the marketplace are working.”

What’s more, the sportswear company managed to beat Wall Street predictions for its revenue throughout the last quarter. Nike raked in some $13.32 billion in its fiscal second quarter, far above analyst predictions of $12.6 billion. Higher-than-expected demand has been great for helping Nike reduce its bloated inventory, helping it get back toward its usually-profitable form.

This is great news for people who hold Nike stock. The company’s share price spiked after the investor call yesterday, jumping 13% to around $117 per share. That’s the stock’s best day yet in 2022, and it should be a welcome change for investors who held out through the worst depths of the company’s recent misfortunes.

Stock Market Outperforms

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The broader stock market has outperformed expectations since the close of trading Tuesday and through this morning. Many analysts pointed to the Nike reports as enough of a catalyst to get the market moving in a bullish direction again, alongside a recent strong report from FedEx. “We got sort of oversold and I think the market was looking for an excuse to rally, and the Nike and FedEx number provided that,” noted CFRA Research’s chief investment strategist, Sam Stovall. “I really question, however, if this is something that’s going to be long-lasting.”

The three major indexes posted stunning comebacks this morning. The Dow Jones jumped some 500 points, around 1.6%, shortly after the start of trading. The S&P 500 and tech-focused Nasdaq also saw massive spikes, each gaining around 1.5% to start the day. 

It’s not all good news, though. The stock market is on track to end the year in its worst hole since the 2008 recession. The Dow is down 8.2% on the year, and the S&P’s dropped 18.6% over the past 12 months. Worst of all, the Nasdaq has suffered a grueling 31.6% drop this year, bringing it to its lowest yearly level in decades.

Home Sales Continue to Sink

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With this level of focus on the stock market, it’s worth glancing at home buying trends in the US. Since housing prices are so dependent on interest rates, it’s easy for an oversold stock market to splash out into the real estate market. Home sales were down an additional 7% in November, extending the sector’s losses to a tenth consecutive down month.

Realtor reports indicate that the sector is down 35.4% over this period last year, indicating a steep drop-off in home buying interest. “In essence, the residential real estate market was frozen in November, resembling the sales activity seen during the […] economic lockdowns in 2020,” says NAR’s chief economist, Lawrence Yun. “The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes. Plus, available housing inventory remains near historic lows.”

If interest rates stay high and the housing market remains frozen, it could spell disaster for the broader economy. Without new homes selling, there’s a large sector of the economy suffering. Everything from banks’ mortgages to construction companies’ bottom lines, there are a lot of factors that become constrained when the real estate market has a persistent down year like this. Will that be enough to reverse the Fed’s quantitative tightening policies?

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