The Dow Jones Industrial Average headed for its biggest loss since 2020 on Wednesday after another major retailer warned of rising cost pressures, underlining investors’ worst fears about rising inflation and a revival of brutal sell-offs in 2022.
The Dow Jones lost 1,255 points, or 3.8%, or the biggest average drop since October 2020. The S&P 500 traded down 4.3%, the biggest drop since June 2020. The Nasdaq Composite dropped 4.9%, the biggest drop In the heavy tech index. Since May 5th, selling has been broad and intense on Wall Street with only 13 members of the S&P 500 in the green.
Markets returned to heavy selling after back-to-back quarterly reports from Target and Walmart fueled investor fears of rising inflation. It’s the Dow’s fifth drop of more than 800 points this year, all of which has occurred as stock selling intensified over the past month, according to FactSet data.
“It is clear that transportation costs are important and affect [some of] “The biggest companies are. So I think investors are scratching our heads,” said Kim Forrest, founder of Bouquet Capital, “So, who’s next?” “They highlight what is happening with the consumer.”
Target stocks fell more than 27% Wednesday after the retailer reported first-quarter earnings that were well below Wall Street estimates Because of the high costs of fuel and compensation. The retailer also saw lower-than-expected sales of discretionary merchandise such as televisions.
The retailer’s report comes right after Walmart on Tuesday reported lower-than-expected earnings as well Cited rising fuel and labor costs. Walmart shares closed Tuesday 11% lower. They are down another 7% on Wednesday.
“The consumer is facing a challenge,” said Megan Hornman, chief investment officer at Verdence Capital Advisors. “We’re starting to see at the end of the year that consumers are turning to credit cards to pay for higher food prices, higher energy prices, and that’s actually gotten worse. Places and Walmart tends to be one of them.”
Other retailers took a hit on Target’s lost quarterly earnings — the SPDR S&P Retail ETF fell more than 8%. Amazon’s stock price is down 6.6%, and Best Buy’s stock price is down more than 11%. The general dollar is down more than 11%, and the dollar tree is down more than 15%. Macy’s shares are down 12%, while Kohl’s shares are down more than 10%.
Lowe fell more than 6% after that Sales forecast lost in the first quarter report As shoppers bought fewer supplies for outdoor projects.
“Any company that relies on household and discretionary purchases is likely to suffer this quarter because a lot of discretionary income has been directed into food and energy prices,” said Jack Aplin, co-founder of Cresset Capital.
TJX-parent TJ Maxx bucked the overall negative trend, with shares up 6% after the retailer reported earnings.
Stocks and other risky assets have come under inflationary pressure and the Federal Reserve’s attempt to curb price increases by raising interest rates has led to concerns about a possible recession.
In an appearance Wednesday on CNBC’s “The Exchange,” Jeremy Grantham said that The current downturn is worse than the tech bubble of 2000. The investor known for identifying market bubbles said that stocks can multiply their losses.
“The other day, our index was down about 19.9% in the S&P 500 and about 27% in the Nasdaq. I would say at least, we’re likely to do twice that,” Grantham said. “If we’re not lucky, which is entirely possible, we’ll do three phases like this and it could take a few years as it did in the 2000s.”
The yield on the benchmark 10-year Treasury fell below 2.9% after briefly rising to 3% on Wednesday morning.
The Dow has fallen for seven consecutive weeks, but stocks have been flat during the previous three trading sessions. Last week, the S&P 500 fell to the edge of a bear market – or 20% below its record high.