Stocks closed sharply lower on Wall Street on Wednesday as Target’s disappointing results sparked renewed fears that inflation was battering US companies.
The benchmark S&P 500 of several index funds fell 4%.
Target lost a quarter of its value, dragging other retailers down with it, after saying its profit fell in half in the latest quarter as freight and transportation costs rose. It comes a day after Walmart cited inflation for its weak results.
The Dow Jones Industrial Average dropped 1,164 points, or 3.6%, and the tech-heavy Nasdaq returned 4.7%. Treasury yields fell as investors sought safe ground.
“A lot of people are trying to anticipate the bottom,” said Sam Stovall, chief investment strategist at CFRA. “The search is when there is no one left to sell.”
Retailers were in the biggest fall since Target slashed after a grim quarterly earnings report.
The weak report raised concerns that ever-increasing inflation is putting a dire strain on a wide range of businesses and could cut their profits deep.
Technology stocks, which led the market’s rally the day before, were the biggest pressure on the S&P 500. Apple lost 5.9%.
All told, more than 95% of stocks in the S&P 500 were down. Utilities also weighed down the index, though not nearly as much as the other 10 sectors, as investors perceived the investment as less risky.
Target’s disappointing report comes a day after the market applauded an encouraging Commerce Department report that showed retail sales rose in April, driven by higher sales of cars, electronics and higher spending at restaurants.
For the past six weeks, the stock has been struggling to break out of the downturn as investors have been worrying. Business is choppy on a daily basis and any data from retailers and consumers is being closely monitored by investors as they try to determine the impact of inflation and whether it will signal a slowdown in spending. A higher-than-expected impact on spending could indicate further sluggish economic growth.
The Federal Reserve is trying to reduce the impact from inflation at the highest 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 moving more aggressively” if inflation fails to subside after earlier rate hikes.
Investors are concerned that if the central bank raises rates too high or too quickly it could trigger a recession. Concerns about global growth remain as Russia’s invasion of Ukraine puts further pressure on oil and food prices, while a lockdown to contain COVID-19 cases in China worsens supply chain problems.
The United Nations is reducing its forecast for global economic growth this year from 4% to 3.1%. The downgrade is broad-based, including the world’s largest economies such as the US, China and the European Union.
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