US stocks suffer worst day since early months of pandemic

U.S. stocks suffered their steepest fall since the early months of the coronavirus pandemic on Wednesday, as weak consumer indicator results stoked concerns about the impact of inflation and choking supply chains on stocks. business profits.

The benchmark S&P 500 stock index fell 4%, its biggest loss since June 2020, with 98% of stocks in the index down on Wednesday.

Target, the retailer, led the declines, plunging 25% after saying rising transportation, wage and fuel costs and disrupted logistics would hurt its profit margins. The warning came a day after Walmart, the world’s biggest brick-and-mortar retailer, cut its profit forecast and said it had also been caught off guard by broad inflationary trends.

The lackluster quarterly reports sparked selling on U.S. stock markets as investors, fearing an economic slowdown, trimmed positions in their portfolios. Tech giants including Apple, Nvidia and Amazon all fell more than 5%, with the tech-dominated Nasdaq Composite down 4.7%.

“There is a beginning of deterioration of the [economic] growth story,” said Michael Metcalfe, head of macro strategy at State Street Global Markets. “And it started to get picked up in [corporate] earnings.”

Rebased line chart showing retailer stocks for sale

The drop in Target stock price was its worst daily decline since 1987, a grim milestone also reached by Walmart in the previous session. Walmart slid further on Wednesday, while other retailers including Dollar Tree, Costco and Best Buy all fell more than 10%.

“Walmart [and] The target numbers are very concerning as they show the consumer reducing discretionary buying while corporate margins return to pre-pandemic levels,” said Eric Johnston, head of equity derivatives and cross assets at Cantor Fitzgerald. . “Those are two big aspects of our bearish thesis.”

The flight from risky assets caused rebounds in government bonds and other assets perceived as safe havens. The 10-year US Treasury yield fell 0.09 percentage points to 2.89%. Yields fall when prices rise. The dollar index, which measures the dollar against a basket of peers, also broke its recent slide to climb 0.5%.

The S&P had climbed 2% on Tuesday, in a short-lived rebound from the worst streak of weekly losses for global stocks since 2008.

Analysts warned Tuesday’s jump was a bearish rally, where downtrends in stock markets are punctuated by short periods of relief as investors remain nervous about rising interest rates worsening a global economic slowdown.

The gloomy mood in the markets came as major central banks, which had set borrowing costs near zero and bought government bonds at unprecedented rates at the start of the pandemic, reversed their policies of support. The Federal Reserve has raised interest rates by 0.75 percentage points since March and signaled further strong hikes on the horizon.

“The weakness in equity markets is primarily due to tighter financial conditions, but what hasn’t been priced in yet is the potential for a moderation in growth and, therefore, earnings,” Candice said. Bangsund, portfolio manager at Fiera Capital.

“We have believed for some time that earnings expectations are overly optimistic given the inflationary environment, which may squeeze profit margins.”

Elsewhere in stocks, the European Stoxx 600 stock index fell 1.1%. Hong Kong’s Hang Seng Index rose 0.2%, while Tokyo’s Nikkei 225 closed up 0.9%.

The pound fell 1.1% against the dollar to just under $1.23 after data showed UK inflation hit a four-decade high of 9% in April, raising concerns about the weak economy.

Brent, the oil benchmark, fell 2.5% to $109.11 a barrel.

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