The Nasdaq and S&P 500 fell 3% on Wednesday amid a rally in economic growth concerns, while retailers hit targets below the S&P 500 after being the latest victims of rising prices.
Target Corporation’s first-quarter profit has halved and the company has warned of a large margin injury on rising fuel and freight costs. Its shares fell 25.2% and are tracking their worst day since the Black Monde crash on October 19, 1987.
The retailer’s results come a day after rival Walmart Inc. cut its profit forecast. SPDR S&P Retail ETF is down 8.2%.
All 11 major S&P sectors declined, with consumer sentiment and technology stocks down 5.7% and 3.5%, respectively.
Rising inflation, the conflict in Ukraine, protracted supply chain snarls, an epidemic-related lockdown in China and the possibility of the central bank tightening aggressive policies have recently weighed on the market, raising concerns about the global economic downturn.
The Wells Fargo Investment Institute on Wednesday adjusted its economic expectations to make its base case a mild U.S. recession in late 2022 and early 2023, based on economic data.
Federal Reserve Chairman Jerome Powell on Tuesday promised that the US Federal Reserve would raise rates as high as necessary to stem inflation.
Traders are set to raise interest rates by 50 basis points by the Fed in June and July.
“A segment of the market is certainly focusing on a potential growth downturn,” said Zachary Hill, head of portfolio management at Horizon Investments.
“The Fed is dead to tightening the financial situation and that means lower equity valuations and a wider credit spread.”
The S&P 500 is down 16.8% so far in 2022 and the Nasdaq is down more than 26%, hit by rising stocks.
The valuation of stocks, as measured by the forward price-to-earnings ratio, has declined sharply in recent weeks and has increased the appeal of the stock for some investors.
“Unless we have clarity (in the Fed), markets are going to be volatile,” said Brooke May, managing partner at investment advisory firm Evans May Wealth.
“But at the moment, the ratings are starting to look interesting and it could go down, these are fairly fair ratings, so hopefully we’re moving closer to the bottom.”
Rate-sensitive Big Tech and growth companies such as Microsoft Corp, Apple Inc., Google Owner-Alphabet Inc., Meta Platform, Tesla Inc. and Amazon.com fell sharply between 3.5% and 6.0% after leading sharp rebounds in previous sessions.
At 12:08 pm ET, the Dow Jones Industrial Average was down 836.46 points, or 2.56%, at 31,818.13, while the S&P 500 was down 125.35 points, or 3.07%, at 3,963.50 points, or 32.46.50 points. %, At 11,551.99.
The CBOE Volatility Index, also known as the Wall Street Fear Measure, rose to 29.54 points after falling for six consecutive sessions.
The numbers are declining for a 4.97-to-1 ratio on the NYSE and a 3.07-to-1 ratio on the Nasdaq.
The S&P index recorded a new 52-week high and 32 new lows, while Nasdaq recorded 24 new highs and 129 new lows.
(Reporting by Amrita Khandekar and Devik Jain in Bangalore; Editing by Shaunak Dasgupta)