Stocks fall sharply as Target's woes renew inflation fears
NEW YORK >> The Dow Jones Industrial Average sank more than 1,100 points and the S&P 500 had its biggest drop in nearly two years Wednesday, as big earnings misses by Target and other major retailers stoked investors' fears that surging inflation could cut deeply into corporate profits.
The broad sell-off erased gains from a solid rally a day earlier, the latest volatile day-to-day swing for stocks in recent weeks amid a deepening market slump.
The S&P 500 tumbled 4%, its sharpest decline since June 2020. The benchmark index is now down more than 18% from the record high it reached at the beginning of the year. That's shy of the 20% decline that's considered a bear market.
The Dow dropped 3.6%, while the Nasdaq fell 4.7%. The three indexes are on pace to extend a string of at least six weekly losses.
“A lot of people are trying to guess the bottom,” said Sam Stovall, chief investment strategist at CFRA. “Bottoms occur when there's nobody left to sell.”
The S&P 500 fell 165.17 points to 3,923.68, while the Dow slid 1,164.52 points to 31,490.07. The Nasdaq slid 566.37 points to 11,418.15.
Smaller company stocks also fell sharply. The Russell 2000 fell 65.45 points, or 3.6%, to 1,774.85.
Retailers were among the biggest decliners Wednesday after Target plunged following a grim quarterly earnings report.
Target lost a quarter of its value after reporting earnings that fell far short of analysts' forecasts. In a sign of the impact of inflation, particularly on shipping costs, Target said its operating margin for the first quarter was 5.3%. It had been expecting 8% or higher. The company also said consumers returned to more normal spending habits, switching away from TVs and appliances and buying more toys and travel-related items.
The report comes a day after Walmart said its profit took a hit from higher costs. The nation's largest retailer fell 6.8%, adding to its losses from Tuesday.
The weak reports stoked concerns that persistently rising inflation is putting a tighter squeeze on a wide range of businesses and could cut deeper into their profits.
“These retailers are having to balance how much of the higher inflation to pass on to consumers versus eating it, so that goes into questions about profitability on the part of companies and that gets to some of these lingering valuation questions for the market,” said Willie Delwiche, investment strategist at All Star Charts.
Other big retailers also racked up hefty losses. Dollar Tree fell 14.4% and Dollar General slid 11.1%. Best Buy fell 10.5% and Amazon fell 7.2%.
Technology stocks, which led the market rally a day earlier, were the biggest drag on the S&P 500. Apple lost 5.6%, its biggest decline since September 2020.
All told, more than 95% of stocks in the S&P 500 closed lower. Utilities fell, though not nearly as much as the other 10 sectors, as investors shifted money to investments that are considered less risky.