Wall Street fell sharply on Wednesday when Target lost about a quarter of its value in the stock market and highlighted concerns about the U.S. economy after the retailer became the latest victim of rising prices.
It was the worst one-day loss for the S&P 500 and Dow Jones Industrial Average since June 2020.
Target Corp’s first-quarter earnings halved, and the company warned of higher margins due to rising fuel and freight costs.
Its shares fell about 25%, losing about $ 25 billion in market capitalization, the worst session since the collapse on Black Monday, October 19, 1987.
The retailer’s results came a day after rival Walmart Inc lowered its profit forecast.
The SPDR S&P Retail ETF was down 8.3%.
“We believe that the development of the impact on retail spending, as inflation outpaces wages even longer than people could have expected, is a major factor in today’s market sell-off,” said Paul Christopher, head of global market strategy at Wells Fargo Investment Institute.
“Retailers are beginning to see the impact of declining consumer purchasing power.”
Shares sensitive to interest rates, added to the recent decline and pulled the S&P 500 and Nasdaq lower. Amazon, Nvidia and Tesla Inc fell by almost 7% and Apple – by 5.6%.
“The downsides outweigh the pros for growth stocks at the moment, and the market is trying to decide how bad it will be,” said Liz Young, head of SoFi’s investment strategy division.
“The market is afraid for the next six months. We may find that it doesn’t have to be as scary as it is, and markets tend to overreact to downturns. ”
All 11 S&P 500 indexes fell, with consumer opinion and consumer staples leading the way, both falling more than 6%.
Rising inflation, the conflict in Ukraine, long supply chains, pandemic-related blockades in China, and tightening monetary policy by central banks have recently boosted financial markets, raising concerns about global economic slowdowns.
The Wells Fargo Investment Institute said Wednesday it expects a slight recession in the U.S. in late 2022 and early 2023.
Federal Reserve Chairman Jerome Powell promised on Tuesday that the U.S. central bank would raise rates as high as necessary to kill the surge in inflation that he said threatens the fundamentals of the economy.
Traders estimate the Fed’s interest rate hike at 50 basis points in June and July.
Unofficially, the S&P 500 fell 4.04%, ending the session at 3923.68 points.
The Nasdaq was down 4.73% to 11,418.15 points and the Dow Jones Industrial Average was down 3.57% to 31,490.07 points.
The S&P 500 has fallen about 18% so far in 2022, and the Nasdaq has fallen about 27%, hit by falling shares.
According to Refinitiv, nearly two-thirds of the S&P 500’s shares have fallen 20% or more from their 52-week highs.
According to Refinitiv, a recent sell-off on Wall Street led to the S&P 500 trading at about 17 times the expected profit, the lowest PE estimate since a 2020 sale caused by a coronavirus pandemic.
The CBOE volatility index, also known as the Wall Street Fear Index, rose to 31 points after falling for six consecutive sessions.
The volume on the American stock exchanges amounted to 12.5 billion shares compared to the average for the last 20 trading days of 13.4 billion.
The decline in emissions exceeded the amount of promotion on the NYSE by a ratio of 5.09 to 1; on the Nasdaq a factor of 3.52 to 1 contributed to the decline.
The S&P 500 has released one new 52-week high and 37 new lows; The Nasdaq Composite recorded 25 new highs and 242 new lows.