US stocks sank Wednesday with investors weighing a strong earnings report continuation from retailer giants against mounting inflation worries.
- The Dow Jones Industrial Average dropped 211.17 points, about 0.5%, and sat around 1.7% from its record.
- The S&P 500 declined 0.2% to 4,688.67
- The Nasdaq Composite lost 0.3% to 15,921.57, and the Dow slipped down by 4.7% in Visa.
The markets are coming off a positive day with all three major averages moving upward, followed by the economic data and corporate earnings signal of US consumers ramping up expenditure despite the rise in prices.
While S&P 500 and Nasdaq are higher for the week, the Dow is lagging.
Markets seem to be contemplating growth, inflation, and margins as some of the largest retailers of the nations have reported October quarter results that, while being good, reveal increasing margin pressures amid supply chain issues and labor shortages, said Jeff Currie, Goldman Sach.
Target, the retail giant, posted beats on the top and bottom lines, but the rising costs might potentially impact the company moving forward as it plans to absorb those costs and not pass them to the customer. As a result, its shares dropped about 4.7%.
Lowe’s, the home improvement giant, rose 0.4%, but as the company topped estimates from the Street, it also raised its full-year sales forecast. TJX shares gained 5.8%, followed by the apparel and home retailer witnessing a quarterly earnings beat on both, top and bottom lines.
“Consumers are spending and engaging in the economy on unexpected levels,” Keith Buchanan, portfolio manager, Globalt Investments. The market is hammered because the costs of running Target and Walmart, the two most prominent retailers in the state, are outpacing the strong consumer if looked at from a brick-and-mortar point of view. Walmart delivered better results than the one expected, although its shares dropped.
The SPDR S&P Retail ETF lost around 2.3% Wednesday. Regardless, same-store sales gains have encouraged retailers, motivated primarily by higher traffic and solid digital growth amid pent-up demand from consumers over the summer.
As investors are anticipating a holiday shopping push into the year-end, they are grappling with the span of good times and the estimates for 2022, according to Buchanan.
Last year, around this time, they expected 2021 to be the year of rebound, the year of getting back on track. And, as the year ended on a strong note, 2022 is begun to be looked at with much more optimism that 2022 will be better than expected, but what about the unintended consequences? He further added as he considered the continuing uncertainty around high inflation and Fed monetary policy.
Tesla surged 3.2% elsewhere, with the stock continuing to make a comeback from a 15.4% loss last week when CEO Elon Musk started his Tesla stock sell-off.
Microsoft shares jumped a little to hit a new intraday record with investors rotating out of value stocks. Financials mainly were going low, and energy stocks were among the most significant laggards in the S&P. Amazon hiked 0.2%, and Apple up 1.6%.
Nasdaq, the tech-heavy index, led the major averages for the quarter up to around 10.1%.
On the downside, Visa shares trickled down as Amazon said it would stop accepting payments via Visa credit cards issued in the UK next year. The change was followed by Visa raising its interchange fees for transactions between the UK and European Union. Mastercard fell 2.8%, it has increased its UK-EU interchange fees.
With the bell, Nvidia shares trickled down 3.1% ahead of its earnings report. Other shares on deck are Bath & Body Works, Victoria’s Secret, and Cisco Systems.