Stocks have once again been bouncing back and forth between inching higher and moving lower, keeping market volatility alive. We're waiting for China to emerge from lockdowns, the Russia war to play out, and for upcoming Fed meetings in June and July. But if we trace the last few days back, it's been earnings, particularly retail earnings, that have taken center state.

We've been watching Walmart (WMT) , Target (TGT) , TJX Companies (TJX) , and Home Depot (HD) earlier in the week, and Thursday morning Kohl's (KSS) , BJ's Wholesale (BJ) and Canada Goose (GOOS) . One of the line items that were paying attention to in these reports is inventory. The reason? Excessive inventories could lead to more aggressive discounting or slow restocking demand. While the former could weigh on product mix and margins, the latter would impact manufacturing activity and slow demand for suppliers.

Excessive inventories could lead to more aggressive discounting or slow restocking demand.

Exiting its April quarter, inventories at Walmart clocked in at $61.2 billion, the highest level in roughly 20 years and 6.4% higher than the $57.5 billion in inventory it held at the end of its October 2021 quarter. We point out that quarter specifically because of its lead into the all-important holiday shopping season, but again exiting the April 2022 quarter, its inventory level was higher. We saw something very similar with Target, Kohl's, Home Depot, BJ's, TJX Companies and even Amazon (AMZN) .

Some companies shared they are comfortable with their inventory levels, but given the bite into disposable income from food and gas inflation, as well as higher credit card financing costs, we aren't as confident as some of those companies. If it were a few companies that were exhibiting such inventory buildup, that would be one thing, but if we pull on the inventory thread it seems to be more than that and that's more than a tad concerning.

As we navigate the rest of the retail earnings season, we'll continue to flesh out this issue and what it could mean for the pace of the economy in the second half of 2022. We'll also be assessing what comparing the inflation data of the last several months has to tell us vs. the retailers that are reporting low-single digit revenue growth for their March and April 2022 quarters. Our guess is their revenue gains could be all on price, which would mean volumes may actually be lower year over year. Before we jump to that conclusion, we'll want to examine the data.

AAP is long WMT, AMZN.