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U.S. stock indexes were trading sharply lower Wednesday, led by retailers whose quarterly results confirmed higher costs for fuel and wages are eating into profits, while hawkish comments from Federal Reserve Chairman Jerome Powell late Tuesday suggested interest costs are likely to rise further also.
All 11 main industry groups in the S&P 500 index were lower, with consumer stocks leading the retreat.
How are stock indexes trading?
-
The Dow Jones Industrial Average
DJIA,
-2.48%
fell 743 points, or 2.3%, to 31,911. -
The S&P 500
SPX,
-2.94%
declined 107 points, or 2.6%, to 3,981. -
The Nasdaq Composite
COMP,
-3.39%
shed 338 points, or 2.8%, trading a5 11,646.
On Tuesday, the Dow Jones Industrial Average gained 431.17 points, or 1.3%, to close at 32,654.59, rising for a third straight day. The S&P 500 climbed 80.84 points, or 2%, to finish at 4,088.85. The Nasdaq Composite jumped 321.73 points, or 2.8%, to end at 11,984.52.
What’s driving the markets?
Shares of Target Corp. TGT tumbled 26% after the retailer reported earnings that fell far short of expectations.
“The Target miss on top of misses from Walmart and Amazon certainly is saying something to investors about profit margin pressure,” Rob Haworth, senior investment strategist at U.S. Bank Wealth Management said in an interview. “I think there’s significant concerns that higher inflation, higher costs are starting to erode the earnings potential at the corporate level.”
Shares of Lowe’s Cos. LOW fell on mixed results from the home-improvement retailer. TJX Cos. shares were up 9.4% to $61.45 Wednesday after the TJ Maxx operator reported double-digit percentage growth in earnings for its first quarter. Cisco Systems Inc. CSCO will report after the close.
Investors were also taking a fresh look at comments from Powell, who on Tuesday spoke of possible “pain” for Americans as the central bank moves resolutely to bring down inflation by raising interest rates. He was speaking at The Wall Street Journal’s Future of Everything event.
“What concerns me is that the Fed is limited in its tools to tackle the particular type of inflation we are facing. They’re kind of using a hammer to put in a screw,” Kevin Philip, partner at Bel Air Investment Advisors said in an interview.
For Haworth, the emphasis in their portfolio has been global infrastructure. “Part of our thought process on that is we think inflation is remaining more persistent, so more real assets exposure is is the tilt we’re looking at really for portfolios,” Haworth said.
“Because inflation levels are remaining elevated and that’s for some segments of the market creating opportunities to to grow earnings, unless we start to see absolute levels of economic activity really come down and take that out of the market,” Haworth added.
Read: Fund managers’ cash pile is the biggest since 2001, says Bank of America
On U.S. economic data, construction of new houses fell slightly in April for the third month in a row. U.S. housing starts slipped 0.2% in April to an annual rate of 1.72 million units. U.S. housing permits fell 3.2% in April to an annual rate of 1.82 million units.
Investors are also expecting comments from Philadelphia Fed President Patrick Harker at 4 p.m. Eastern Time.
Which companies are in focus?
-
Shares of AutoWeb Inc.
AUTO,
-17.20%
were down 17% after plunging 65% Tuesday. The drop came after the company warned investors that it had “substantial doubt” in its ability to continue as a “going concern” given its troubled cash position. -
Doximity Inc.
DOCS,
-10.76%
shares fell 9.5% toward all-time lows, following an earnings report that projected an unexpected revenue decline in the current quarter.
How are other assets trading?
-
The yield on the 10-year note
TMUBMUSD10Y,
2.921%
declined 4.8 basis points to 2.922%. Yields and debt prices move in opposite directions. -
Oil futures rose, with the U.S. benchmark
CL.1,
-1.94%
down 0.9% near $111.5 a barrel. -
Gold futures
GC00,
+0.20%
fell 0.4% lower to $1,811.80 an ounce. -
In European equities, the Stoxx Europe 600
SXXP,
-1.14%
was down 0.7%, while London’s FTSE 100
UKX,
-1.07%
lost 0.6%. -
In Asia, the Shanghai Composite
SHCOMP,
-0.25%
ended 0.3% lower. Meanwhile, the Hang Seng Index
HSI,
+0.20%
finished higher by 0.2% and Japan’s Nikkei 225
NIK,
+0.94%
rose 0.9%.
