The New York Stock Exchange Building (GETTY IMAGES NORTH AMERICA/SPENCER PLATT)
The New York Stock Exchange accelerated its decline mid-session on Wednesday, potentially wiping out gains from the significant rebound from the previous day following profit-taking and announcing disappointing results from consumer-concerned retail companies. , the engine of the American economy.
At around 4pm GMT, the Dow Jones index lost 2.42% and the Nasdaq, with strong tech colors, 3.32%, while the S&P 500 lost 2.60%.
On Tuesday, indices had recovered, driven by technology and attracting bargains, after seven weeks of losses for the Nasdaq.
The Dow Jones gained 1.34% to 32,654.09 points, the Nasdaq rose 2.76% to 11,984.52 points and the S&P 500 rose 2.02% to 4,088.85 points.
“U.S. stocks plunge on disappointing results from Target and lower-than-expected earnings at Lowe’s, with both retailers warning of mounting cost pressures,” said Schwab analysts.
The spectacular drop in Target supermarket shares (-25% to $160) – a rare decline in retail value – held the attention of investors as it showed how much price increases are 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.
“By saying this, the distribution bosses are dealing with a huge loss of confidence!” Concerned Gregori Volokhine of Meeschaert Financial Services. “This is the biggest drop in the stock since 1987,” the analyst said.
Investors also processed statements on Tuesday from Jerome Powell, head of the Federal Reserve, who, as National Securities’ Art Hogan put it, “left no doubt about the Fed’s determination to contain inflation.” by raising interest rates or doing something else”.
“Mr Powell also acknowledged that it would be painful — perhaps with a small rise in unemployment — but it was worth it because he believes price stability is the bedrock of the economy,” the analyst said again.
The president of the monetary institution confirmed during a talk with the Wall Street Journal that the Central Bank will tighten its monetary conditions sharply until there is “clear evidence” that inflation is slowing.
For Spartan Capital’s Peter Cardillo, “the indices’ decline reflected a combination of factors, including investor profit-taking, bad corporate news, and a poor indicator with the number of home startups falling.”
The collapse of Target, a chain of middle-class retail stores, echoed the disappointing results of Walmart, the number one discount chain more popular with lower incomes, causing more concern for investors.
“People are buying less and less expensive products and are turning more and more to white label products,” noted Gregori Volokhine.
“Low-income earners are Walmart, middle-income earners are people who buy from Target, so it’s going up the pyramid,” the Meeschaert analyst noted.
“Reality is not very good for consumption, we have to face it,” he added.
Another store brand, Lowe’s, which specializes in home furnishings, was sanctioned by investors (-5.61% to $183) after also announcing mixed results with quarterly sales dropping 3%.
In China, Prime Minister Li Keqiang has called for “urgent” support for the country’s struggling economy. He urged local authorities on Wednesday to “strengthen their sense of urgency” and launch new measures to support a national economy weighed down by anti-covid restrictions.
10-year Treasury yields fell sharply on the back of purchases of safe-haven bonds, the price of which rises when their yields fall. They were at 2.91% against 2.99% before the market opened.