Dow falls 1,100 points for biggest drop since 2020 as this year’s Wall Street sell-off intensifies

The Dow Jones Industrial Average posted its biggest loss since 2020 on Wednesday after another major retailer warned of rising cost pressures, confirming investors’ worst fears about rising inflation and reigniting the brutal sell-off. of 2022.

The Dow lost 1,164.52 points, or 3.57%, to 31,490.07, the biggest drop in the average since June 2020. It was the lowest close for the Dow since March 2021.

The S&P 500 was down 4.04% at 3,923.68, also the worst drop since June 2020. The Nasdaq Composite was down 4.73% at 11,418.15, which is the biggest drop in the tech index since June 5. may. Selling was wide and intense on Wall Street with only eight members of the S&P 500 in the green.

Markets were heavily sold again after two consecutive quarterly reports from Target and Walmart stoked investor fears that rising inflation would hit corporate profits and consumer demand. It’s the Dow’s fifth drop of more than 800 points this year, all of which came as the stock selloff intensified in the past month.

“The consumer is challenged,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “We started to see at the end of the year that consumers were turning to credit cards to pay for rising food prices, rising energy prices, and that’s actually gotten a lot worse… This is going hurt the retail leaders. places and Walmart tends to be one of them.

Shares of Target fell 24.9% on Wednesday after the retailer reported first-quarter earnings that were much lower than Wall Street estimates due to higher fuel and compensation costs. The retailer also saw lower-than-expected sales of discretionary products like televisions.

This follows Walmart on Tuesday posting earnings that missed expectations as it also cited higher fuel and labor costs. Walmart shares ended Tuesday down 11%. They fell another 6.8% on Wednesday.

“It is clear that transportation costs matter and are impacting [some of] the biggest companies,” said Kim Forrest, founder of Bokeh Capital. “So I think investors are scratching their heads thinking, ‘so who’s next?’ And they are giving visibility to what is happening with the consumer.”

Other retailers were hurt by Target’s quarterly profit loss: The SPDR S&P Retail ETF fell 8.3%. Amazon’s share price fell 7.2% and Best Buy’s share price fell 10.5%. Dollar General fell 11.1% and Dollar Tree decreased 14.4%. Macy’s shares fell 10.7%, while Kohl’s shares fell 11%.

Lowe’s fell 5.3% after missing sales expectations in its first-quarter report as shoppers bought fewer supplies for outdoor projects.

“Any business that relies on households and discretionary purchases is likely to suffer this quarter because a lot of discretionary income has been funneled into food and energy prices,” said Jack Ablin, founding partner at Cresset Capital.

Stocks and other risky assets have come under pressure from inflation and the Federal Reserve’s attempt to contain price gains through rate hikes, raising concerns about a potential recession.

In an appearance Wednesday on CNBC’s “The Exchange,” Jeremy Grantham said the current recession is worse than the tech bubble of 2000. The investor, known for spotting market bubbles, said stocks can more than double their losses.

“The other day, we were down 19.9% ​​on the S&P 500 and down 27% on the Nasdaq. I would say, at least, we’re probably going to be down twice as much,” Grantham said. “If we’re unlucky, which is very possible, we’d do three stages like that and it could take a couple of years like it did in the 2000s.

The yield on the benchmark 10-year Treasury note fell below 2.9% after briefly topping 3% on Wednesday morning as investors returned to bonds as a safe haven.

The Dow has declined for seven straight weeks, but stocks have stabilized during the previous three trading sessions. Last week, the S&P 500 fell to the brink of a bear market, or 20% below its all-time high.

After Wednesday’s drop, the S&P 500 is now 18.6% below its record and down 17.7% for 2020.

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