Finimize - 👟 Nike took a tumble

What’s going on here?

Nike handed over an uninspiring full-year outlook, so investors made their thoughts known.

What does this mean?

Nike’s sales were nearly 2% lower last quarter than the same time last year. What’s worse, there’s no sign that the issues plaguing sales – like a pullback from shoppers in China – are letting up. That explains why the world’s biggest sportswear company now expects sales to be a worse-than-expected 10% lower this quarter than the same period last year. And that’s fed into the outlook for the year as a whole: Nike predicts sales will be down from last year, while analysts had hoped for a tiny 1% increase. Investors bolted, sending shares down 14% on the day – and that’s on top of the 12% dip Nike’s already suffered this year.

Why should I care?

Zooming out: Even the not-so-well-laid plans…

Eager to make more money from each sale, Nike’s been weaning itself off wholesalers and investing in its own channels instead. So far, that decision hasn’t helped, but hindered: sales from Nike’s own website, app, and stores fell 8% last quarter from the same time last year. That focus might be better placed elsewhere, then. Analysts believe the company isn’t spending enough time and money designing innovative products – the very thing that earned Nike the “it factor” in the first place.

The bigger picture: The kids are alright.

Nike needs to stand out now more than ever, with newcomers like On Holding AG and Deckers Outdoor – newly famed for Hoka running shoes – chipping away at its share of the market. See, smaller companies are using social media to build strong communities, threatening the status quo that legacy brands spent decades establishing. Just look at the cosmetics industry. Glossier and Fenty Beauty have stolen customers from major brands by focusing on more affordable pricing and makeup for diverse skin tones, winning over shoppers who have long been neglected by luxury names.

What’s going on here?

US core inflation rose 2.6% from a year ago in May, landing within touching distance of the Federal Reserve’s (the Fed’s) elusive target.

What does this mean?

Headline inflation stayed the same from April’s release, marking the first month without an increase this year. Although, the most important number for the Fed is core inflation, which excludes volatile food and energy prices. That was up only 0.1% last month, and 2.6% compared to last year. In other words, it’s getting closer to the Fed’s 2% target. Still, it’ll take a long time for Americans to let their guards down: even though their average take-home income rose a better-than-expected 0.5%, consumer spending was lower than expected.

Why should I care?

For markets: The scissors have child-lock on.

Despite this promising data, traders still doubt that interest rates will be cut at the Fed's next meeting in July. Instead, they’re predicting a 60% chance of a cut in September, with maybe another one before the year’s end. Remember, too, that the Fed won’t act until it sees a sustained pattern in the numbers. And even with rates at a 16-year high, the economy and stock markets have stayed stronger than most expected. So for the Fed, there’s no need to rush.

The bigger picture: A world wide web.

The higher a country’s interest rates, the more investors tend to flock toward its currency. So the US dollar is basking in glory these days, leaving the currencies of countries with lower rates – like Japan – to watch with envy. Higher rates haven’t been kind to emerging markets, either. They often borrow in US dollars, so their payments bump up when the greenback strengthens. That said, the US hasn’t gotten off scot-free: companies that rely on debt are feeling the pinch from higher borrowing costs – we’re looking at you, private equity and real estate.