Damian J. Trois and Alex Weig | Associated Press
The Dow Jones industrial average fell more than 1,000 points on Wednesday as well big income misses Target and other major retailers have raised fears among investors that rising inflation could severely cut off corporate profits.
Broad sell-offs wiped out gains from a solid rally the day before, the latest volatile daily stock fluctuations in recent weeks amid a deepening market downturn.
The S&P 500 was down 3.8% as of 1:53 p.m. Now the benchmark index has fallen by 18% from the record high reached at the beginning of the year. It is ashamed of the 20% reduction that is considered a bear market.
The Dow was down 1092 points, or 3.3%, to 31,565, while the Nasdaq was down 4.5%.
Retailers had some of the biggest declines after Target collapsed after a grim quarterly earnings report.
The retailer lost a quarter of its value after reporting profits that did not significantly meet analysts’ forecasts, citing higher costs. Target said its operating margin for the first quarter was 5.3%. He expected 8% and above.
The report came a day after Walmart said its profits had suffered from higher costs. The country’s largest retailer was down 6.7%, adding losses from Tuesday.
Weak reports have raised concerns that rising inflation is putting more pressure on a wide range of businesses and could cut their profits more deeply.
Retailers have suffered some of the biggest losses. The Dollar Tree fell 16.3% and the Dollar General fell 12.1%. Best Buy was down 11.4% and Amazon was down 6.3%.
Manufacturers of household goods and grocery stores also fell sharply. Kroger was down 5.8% and Procter & Gamble was down 5.6%.
The stock technology that led the rally the day before was the biggest boost for the S&P 500. Apple lost 4.9%.
Overall, more than 95% of the shares of the S&P 500 fell. Utilities have also hampered the index, though not as heavily as the other 10 sectors, as investors have shifted money to investments that are considered less risky.
Bond yields fell. Yields on 10-year Treasury bonds fell to 2.88% from 2.97% on Tuesday at the end.
The disappointing report from Target came a day after the market appreciated an encouraging report from the Department of Commerce that showed an increase in retail sales in April due to increased sales of cars, electronics and higher restaurant spending.
Over the past six weeks, stocks have struggled to recover as investors have become increasingly concerned. Trade has been volatile on a daily basis, and any data on retailers and consumers is closely monitored by investors as they try to determine the impact of inflation and whether this will slow costs. A larger-than-expected cost blow could indicate slower economic growth ahead.
The Federal Reserve is trying to mitigate the impact of the highest inflation in four decades by raising interest rates. On Tuesday, Fed Chairman Jerome Powell told a Wall Street Journal conference that the U.S. central bank “will have to consider more aggressive action” if inflation fails to fall after a previous rate hike.
Investors are worried that the central bank could cause a recession if it raises rates too high or too fast. Remaining concerned about global growth as Russia’s invasion of Ukraine puts even more pressure on oil and food prices, and blockades in China to stop COVID-19 cases exacerbate supply chain problems.
The United Nations is significantly lowering its global economic growth forecast for this year from 4% to 3.1%. The decline is broad and includes the world’s largest economies such as the US, China and the European Union.
Veiga reports from Los Angeles.