New Wall Street black session, one of the worst since 2020 – 05/18/2022 at 10:42 PM

The facade of the New York Stock Exchange (AFP/ANGELA WEISS)

Wall Street had another blackout session on Wednesday, one of the worst since 2020, starting the day after a rally amid a string of bad announcements from major retailers, fueling fears over consumption and corporate profits.

According to the final results, the Dow Jones index fell 3.57% to 31,490.97 points.

The Nasdaq fell 4.73% to 11,418.15 points and even fell 5% shortly before the close. The strong technology color index is now 30% below its peak. The S&P 500 lost 4.03% and fell below 4,000 points to 3,924.18 points.

The dramatic drop in Target supermarket shares (-24.87% to $161.73) – a rare decline in retail value – caught the attention of investors as it showed how much the price increase is beginning to weigh on consumption and corporate profits.

The chain blamed a halving of its quarterly profit and its boss, Brian Cornell, complained of cost increases. He warned that sales will fall in 2023. Fuel and freight costs for the group have increased by $1 billion.

“We started the session at half-mast because Target presented this appalling earnings outlook,” said LBBW’s Karl Haeling.

“Then the market sell-off perpetuated itself and the more the indices fell, the more the market worried about future earnings, operating margins, recession and so on,” he continued.

The collapse of Target, a chain of mid-range retail stores, echoed the disappointing results of Walmart (-6.84% to $122.36), the number one discount chain more popular with low incomes, further worrying investors.

“People are buying less and less expensive products and are turning more and more to white label products,” Gregori Volokhine was quoted as saying by the management of the retail chains.

“The low income is Walmart, the medium income is people who buy from Target, so it goes up the pyramid,” noted the Meeschaert analyst, referring to the impact of inflation on spending consumers.

“Reality is not very good for consumption, we have to face it,” he added.

Other brands paid the price, Costco, the wholesale distributor, lost 12.45% to $429.40, Best Buy, the electronics specialist, also lost nearly 11%, while the $1 retailer, Dollar Tree, lost 14.42%.

The 11 sectors of the S&P 500 fell into the red, starting with non-essential goods and services (-6.60%), a rare decline, and information technology (-4.74%).

The big names in tech collapsed such as Amazon (-7.16% to $2,142.25), Apple (-5.64% to $140.82), Netflix (-7.02% to $177.19 ).

– pass on costs-

After seven weeks of losses and this new brutal fall, the Nasdaq, which includes a number of technology stocks, returned to November 2020 levels. The Dow Jones flagship stock index and the S&P 500, which is more representative of the US market, are at their lowest since March 2021.

“Today’s sell-off is about companies’ ability to pass on higher costs. We wondered, well, we kind of got the answer with the results,” explains Quincy Krosby, chief strategist at LPL Financial.

“Admittedly, consumers continue to spend, but many of the major retailers are unable to pass on labor costs and higher prices, driven by a still limited supply chain,” he said.

According to her, “growth fears hang over the market at times and have increased as we begin to factor in a deeper slowdown.”

10-year Treasury yields fell as a result of purchases of safe-haven bonds, the price of which rises when their yields fall. They were at 2.87% against 2.99% before the market opened.

“Looks like we haven’t reached the bottom yet,” complained Karl Haeling. “It’s almost a little disappointing to see the VIX volatility index not explode again, as if the panic, the great panic, hadn’t happened yet,” he said. The barometer, also known as the “anxiety index”, stood at about 30 points and fell below the level of early May in early May.


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