The stock market was lower Wednesday, as earnings from
and other retailers disappointed, while bond yields crept higher.
Shortly after the open, the
Dow Jones Industrial Average
fell 340 points, or 1%, while the
declined 1.3%, and the
dropped 1.6%. The yield on the 10-year Treasury note has risen 0.037 percentage point to 2.977%.
The market’s decline comes as earnings continue to show the pressure inflation is placing on both consumers and retailers alike. Target (ticker: TGT) stock, for instance, has tumbled 24% after the retailer reported earnings well below analysts’ forecasts. While sales were solid, higher costs caused earnings to miss and margins to get squeezed, similar to what
(WMT) revealed in its own earnings Tuesday.
The problem, it seems, is that inflation is forcing consumers to spend more on food and less on more profitable discretionary items, said MKM analyst Bill Kirk. “The discretionary parts of Target appear to be under massive pressure, and the stability of food isn’t enough given the lighter mix,” he wrote. “With Target and Walmart’s results, we believe discretionary retailers and tertiary branded companies will be under more pressure than staples retailers.”
The market’s drop comes one day after stocks finished with strong gains—the Dow gained 1.3%, the S&P 500 rose more than 2% and the Nasdaq jumped 2.8%. Boosting optimism was the fourth straight monthly gain for retail sales in the U.S. during April. Retail sales, however, are backward-looking, and wouldn’t catch all of the pressures Walmart and Target discussed in their reports.
The market also seems to be dealing with comments from Federal Reserve Chairman Jerome Powell on Tuesday that there “could be some pain involved” in the Fed’s efforts to bring down the highest inflation in the U.S. in 40 years. Powell told a conference hosted by The Wall Street Journal that the Federal Reserve will keep boosting interest rates until it sees inflation “coming down in a convincing way. Until we do, we’ll keep going.”
That’s not quite how the market should have reacted, wrote Rosenberg Research’s David Rosenberg. “It was interesting to see the risk-on sentiment seemingly ignore the stream of Fed speakers of late—who were all committed to the Fed’s plan to remove policy accommodation,” he explained. “After yesterday’s broad rally, there is no follow through in U.S. equities with futures in the red as tech stocks feel the brunt.”
In other market action, Asian shares closed mixed on Wednesday, with Tokyo’s Nikkei 225 rising 0.9%, and the Shanghai Composite declining 0.3%. European shares traded slightly lower Wednesday. WTI crude, the U.S. oil benchmark, had risen 1.1% to $113.57 a barrel.
Stocks on the Move Wednesday
(SQ), the company formerly known as Square, fell 0.7% despite being named a Positive Fresh Pick at Baird. The company will be hosting an investor day on Wednesday.
(MNST) rose 0.1% after getting upgraded to Outperform from Market Perform at Bernstein.
(V) ticked up 0.3% after being started with a Conviction Buy rating at Goldman Sachs.
Penn National Gaming
(PENN) gained 0.4% after getting upgraded to Buy from Hold at Jefferies.
(TSLA) dropped 2.4% after Piper Sandler lowered its target price on the stock to $1,035 from $1,260.