US stocks fell sharply, as the Dow Jones Industrial Average suffered its worst day since 2020, as the latest batch of disappointing earnings from major retail traders heightened investor fears of a recession.
The Dow Jones Industrial Average as of 4 p.m. ET fell about 1,164 points, or 3.6%, to 31,490, the worst percentage drop since June 11, 2020 and the lowest closing level since March 2021.
The S&P 500 was down 4%, and the Nasdaq Composite was down 4.7%. The moves mark a turn from Tuesday, when technology shares led rebound in the markets.
Major retailers said their profits were hit by rising costs, slowing sales and supply chain disruptions. shares Goal Sink 25% after the company announced a quarterly Missed Gains Analysts forecast, put it on its right track Worst performance for a day Since Black Monday in 1987. Shares of Dollar Tree, Dollar General and Costco Wholesale have also been on track to post their biggest declines in years.
The results prompted Wall Street to wrestle again with the idea that the global economy could be headed into a recession. althoug The discussion is far from settledIt bothered stocks and other risky assets throughout the year, with the latest data showing the degree to which inflation is affecting US consumers.
“Inflation affects every aspect of the earnings report, whether it’s on the transportation side or the supply chain disruption,” said Nick Giacomakis, president and founder of NEIRG Wealth Management. “Customers are no longer buying the more expensive items they normally buy. It all turns into the earnings report.”
Brent crude, the international oil standard, fell 2.5 percent to $109.11, another indicator of investor concerns about economic growth. Oil prices have been highly reactive in recent months to both Russia’s war against Ukraine, which may disrupt supplies, and shutdowns in major Chinese cities that reduce demand. Shanghai government started Preparing the city for reopening.
At the forefront of investors’ minds is high inflation for decades in the US, how much policy makers are willing to do to subdue it and what changes in monetary policy mean for economic growth. Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank’s determination to fight inflation should not be questioned, Even if the required steps raise unemployment.
Walmart shares fell 6.8%, extending their 11% decline Tuesday after the retailer reported that it was getting Shrinking due to rising food prices and other increased costs. Lowe’s shares fell 5.2% after the home improvement retailer reported that comparable store sales were weaker than expected.
“We are seeing a continuous shift in the composition of consumption, away from goods and back towards services,” said Garrett Melson, portfolio strategist at Natixis Investment Managers. “Of course, this will affect merchandise retailers.”
Russia’s war in Ukraine and China’s strategy of not spreading COVID-19 have also shaken the markets. The declines were widespread. Bonds, which are usually havens, are falling along with stocks.
The Discretionary Consumer Goods and Consumer Goods sectors were the worst performers on Wednesday, down 6.6% and 6.4%, respectively. Both sectors were on track to post their biggest one-day losses since March 2020.
“We expect growth to start to slow over the next few months,” said Salman Ahmed, global head of macroeconomics at Fidelity International, adding that he expects the Fed’s actions to help curb inflation. “Then the Fed’s next step will be to focus on the growth shock.”
He said that the mix of fears that plagued the markets had prompted Mr. Ahmed to adopt a more cautious investment approach in recent weeks.
Investors are also watching whether Russia’s war against Ukraine could heighten geopolitical tensions. Finland and Sweden I officially applied for membership in NATO On Wednesday, a move that, if approved, would fundamentally change the security landscape in northern Europe.
return on standard 10-year treasury bonds It fell to 2.884% from 2.969% Tuesday. Yields and prices move inversely.
Offshore, the Stoxx Europe 600 closed down 1.1%. The British pound fell by about 0.6% against the dollar after new figures showed that the annual rate of inflation in the United Kingdom reached Highest level in four decades 9% in April as higher energy prices were fueled by home utility bills.
In Asia, new data showed that Japan’s economy shrinks In the first three months of this year, when restrictions related to the resurgence of Covid-19 infections hampered consumer spending. Despite this, Japan’s Nikkei 225 index closed 0.9% higher.
Both Cosby in South Korea and Hang Seng in Hong Kong added 0.2% on Wednesday. China’s Shanghai Composite Index is down 0.2%.
Corrections and amplifications
Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank’s determination to combat inflation should not be called into question. An earlier version of this article incorrectly stated that Mr. Powell made this statement on Wednesday. (Corrected May 18).
Copyright © 2022 Dow Jones & Company, Inc. all rights are save. 87990cbe856818d5eddac44c7b1cdeb8