Wal-Mart Sales and Profits Drop

May 15, 2014 9:33am

Morning Money Memo…

Many Americans are struggling to keep up with their daily bills. This morning’s quarterly report from Wal-Mart may be evidence that, despite a growing economy and solid stock market returns, shoppers remain very cautious about their spending.

Wal-Mart reported declining U.S. sales and profits in the first quarter. Numbers from the world’s largest retailer were worse than expected and sent Wal-Mart shares down nearly 3 percent.

A company statement blamed “severe weather in the U.S.” for a 5 percent decline in earnings compared with last year. But guidance for this quarter was for more of the same, with flat sales expected.

Wal-Mart’s report is a barometer of U.S. consumer spending. Company profits were also reduced because the retailer is boosting investments in e-commerce and small stores as it responds to changes in shopping behavior.

Demonstrating for Higher Pay at Fast-Food Chains

Labor organizers said protesters would turn out today in support of higher pay for workers at fast-food chains, including McDonald’s, Burger King and Taco Bell.

The demonstrations build on a campaign by unions to bring attention to the plight of low-wage workers and get the public behind the idea of a $15-an-hour wage.

The fast food industry has said higher pay would lead to fewer jobs. The campaign came as President Obama worked to raise the federal minimum wage of $7.25 an hour.

Can Middle Class Afford Homes?

Government bond yields hit a six-month low with the 10-year note falling to 2.53 percent. Mortgage rates have been falling for weeks, improving housing affordability.

But many young Americans find it too expensive to buy a home. The percentage of first-time homebuyers is well below the traditional average.

“It’s getting harder for the middle class to buy a home,” said Jed Kolko, chief economist with Trulia, the online real estate firm. “In the most expensive markets, especially on the coasts, less than a quarter of the homes for sale are within reach of the middle class.”

But things are very different in the Midwest and most of the South.

“In lots of markets, like Cleveland and Detroit, more than 80 percent of the homes for sale are within reach of the middle class,” said Kolko.

Push for Smartphone Kill Switches

Minnesota has enacted the nation’s first law requiring smartphones and tablets sold in the state to have a remote shut-off feature.

The kill switch bill was signed by Gov. Mark Dayton after lawmakers passed it last week. The measure will take full effect in July 2015, but advocates are hoping the wireless industry will make technology updates sooner.

State Rep. Joe Atkins described the law as “a vaccine” for the epidemic of smartphone theft and robberies tied to mobile devices. People who report a kill switch-equipped phone lost or stolen can disable it and wipe the data slate clean by contacting their carrier.

Another GM Recall

General Motors has announced another recall. This one involves more than 140,000 Chevrolet Malibu midsize cars. They have a problem with the power-assisted brakes.

The recall affects 2014 Malibu’s with 2.5-liter four-cylinder engines and stop-start technology that shuts off the engine at red lights. GM says a software problem in the brake control computer can disable the power brakes.

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