US equity markets plunge sharply as investors worry about recession | Stock market

The wild ride in US stock markets continued on Wednesday, with the Dow Jones Industrial Average falling more than 1,100 points as investors worried about an impending recession.

All major US markets fell sharply, with the S&P falling 4%, its biggest decline since June 2020, and the tech-heavy Nasdaq falling 4.7%.

On Tuesday, markets were up on positive consumer spending news and signs that China was easing its strict Covid-19 lockdowns. Just a day later, concerns about an economic slowdown sparked a broad sell-off.

The sell-off began after Target said supply chain costs and inflationary pressures had reduced profits and customers bought fewer higher-margin items such as kitchen appliances, televisions and furniture.

The retailer’s announcement came a day after Walmart said its profits were also hit by higher costs. The latest news from Target sparked a sale for retailers including Amazon, BestBuy, Costco and Dollar General.

Investors are increasingly concerned that rising inflation, and the Federal Reserve’s plans to address it by raising interest rates sharply, will trigger a recession.

Target management expects inflation to add $1 billion in fuel and freight costs this year and sees little sign of those costs declining in 2022. Gas prices hit $4 a gallon in every state for the first time this week.

“During the quarter, we faced unexpectedly high costs, driven by a number of factors, which resulted in profitability that was well below our expectations, and well below where we expect to operate over time,” said Brian Cornell, CEO of Target.

The sale was widely supported. Tech companies such as Apple, Meta and Tesla fell sharply, as did household goods and supermarket makers including Kroger and Procter & Gamble. General Motors and American Airlines coincided with banks like JP Morgan and Goldman Sachs.

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 retail and consumer data is closely monitored by investors as they try to determine the impact of inflation and whether it will lead to a slowdown in spending. Greater than expected spending pressures could point to slower economic growth going forward.

The Fed is trying to dampen the impact of its highest inflation in four decades by raising interest rates. On Tuesday, Fed Chair Jerome Powell told a Wall Street Journal conference that the US central bank “will have to consider acting more aggressively” if inflation does not decline after past rate hikes.

Investors are also concerned about global growth, as Russia’s invasion of Ukraine puts even more pressure on oil and food prices, while lockdowns in China to contain Covid-19 cases exacerbate supply chain problems.

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 EU.

Associated Press contributed to this story

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