Shares plunged in afternoon trading on Wall Street on Wednesday, led by steep declines in retailers as Target plummeted after releasing a grim quarterly report.
The Dow Jones Industrial Average fell 1,100 points, or 3.4%, to 31,536 as of 2 p.m. EST. The S&P 500 lost 3.9% and the Nasdaq fell 4.5%.
Target lost a quarter of its value after reporting revenues that lag far behind analysts’ forecasts, while citing higher costs. The report comes a day after Walmart said its profits suffered from higher costs. Walmart, the country’s largest retailer, fell 6.6%, contributing to Tuesday’s losses.
The weak reports fueled concerns that scorching inflation is putting pressure on a wide range of companies and could cut deeper into their profits. They also coincide with an increasingly aggressive stance by the Federal Reserve, with Chairman Jerome Powell saying on Tuesday the bank might consider “acting more aggressively” to raise interest rates if inflation doesn’t fall soon.
“Inflation concerns and an aggressive Fed are nothing new, but now add to that concerns about profit margins and the impact of inflation on consumers and you have the recipe for a major down day,” said Ryan Detrick, chief market strategist at LPL. financial. , in an email.
Retailers suffered some of the biggest losses. Dollar Tree fell 16.8% and Dollar General fell 11.3%. Best Buy fell 9.3% and Amazon 5.5%. Technology stocks also fell sharply. Apple lost 4.2%. Household goods makers and supermarkets also fell sharply, with Kroger falling 5.6% and Procter & Gamble losing 4.4%.
Target’s disappointing report comes a day after the market welcomed an encouraging report from the Commerce Department that showed retail sales rose in April, driven by higher sales of autos, electronics and increased spending in restaurants.
“Challenging and Uncertain” Outlook
Utilities outperformed the rest of the market as investors shifted money into investments considered less risky.
By many measures, the economy remains healthy. Consumer spending, which drives the bulk of economic activity, remains strong, unemployment is low and workers are given the opportunity to change jobs. But many economists fear that high energy and food prices will slow growth.
Treasury Secretary Janet Yellen called the outlook for the global economy “challenging and uncertain”.
“Higher food and energy prices are having stagflationary effects, namely depressing production and spending, and increasing inflation around the world,” she said at a news conference.
Stocks have struggled to come out of a slump over the past six weeks as worries pile up for investors. Trading is choppy on a daily basis and all of the retail and consumer data is closely monitored by investors as they try to determine the impact of inflation and whether it will cause a slowdown in spending. Greater than expected spending pressures could indicate slower economic growth going forward.
The Federal Reserve is trying to reduce the impact of theby raising interest rates. But investors are concerned that the central bank could trigger a recession if interest rates are raised too high or too quickly. Global growth concerns remain as Russia’s invasion of Ukraine puts further pressure on oil and food prices as COVID-19 shuts down in China †
The United Nations is significantly lowering its forecast for global economic growth this year from 4% to 3.1%. The write-down is broad-based and includes the world’s largest economies such as the US, China and the European Union.