Dow tumbles 200 points, stocks falter after target earnings fall

Topline

The stock market fell on Wednesday, with Wall Street’s recent rally coming to a halt as investors assessed the latest batch of retail earnings, particularly a sharp drop in Target earnings, while bracing for the release of the minutes of the Federal Reserve July policy. Meet.

Highlights

Stocks reversed some of their gains from earlier in the week: The Dow Jones Industrial Average fell 0.6%, or about 200 points, while the S&P 500 lost 0.8% and the strong Nasdaq Composite technological component, 1.4%.

Markets opened lower after a string of disappointing retail profits, with Lowe’s reporting falling sales while big-box retailer Target said profits fell 90% from a year ago in amid heavy discounts to offload excess inventory.

“We have seen mixed results from retailers and the big questions are whether the consumer will continue to spend and how will they reallocate their purchases as inflation continues to impact spending choices “, says Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance. .

Investors combed through new economic data from the Census Bureau on Wednesday, showing retail sales flat in July: auto sales and gasoline prices fell, though consumers made more ‘online shopping.

Markets also braced for the release of the minutes of the Federal Reserve’s last policy meeting in July, when the central bank raised interest rates by 75 basis points for the second time this summer.

Experts are hoping for clues on the Federal Reserve’s rate hike trajectory, with traders now nearly evenly split between expecting a 50 basis point rate hike in September or a third consecutive 75 basis point hike. base, according to data from the CME Group.

Surprising fact:

The meme stock frenzy has made a comeback in recent weeks. Bed Bath & Beyond saw its shares soar 27% on Wednesday thanks to a massive surge in meme stock traders on forums like Reddit’s WallStreetBets. The rally follows a 29% gain for the stock on Tuesday, with shares now up more than 330% in August alone.

Crucial quote:

“We advise investors against continuing this rally,” according to a recent note from Mark Haefele, chief investment officer at UBS Global Wealth Management. “We anticipate further market volatility ahead and continue to recommend positioning portfolios for resilience in various scenarios.”

Key Context:

Stocks are trying to post a fifth straight week of gains. The S&P 500 is currently on its best run since late last year amid investor optimism that inflation, which cooled in July for the first time in months, may finally have reached a peak. Improving economic data has also bolstered hopes of a monetary policy pivot from the Federal Reserve, although most experts agree that it is still far too early for the central bank to stop. raise interest rates. While the S&P 500 was down more than 20% earlier this year, hitting a low point on June 16, markets have since rebounded, with the benchmark down just 11% so far. in 2022.

Further reading:

Target’s profits drop 90% as it relies on discounts to get rid of inventory (Forbes)

Bed Bath & Beyond jumps 29% as Meme-Stock traders boost shares despite analyst warnings (Forbes)

Walmart jumps 5% after strong earnings and further “progress” in reducing inventory levels (Forbes)

The Dow Jones jumped 500 points after the slight cooling in consumer prices in July: has inflation peaked? (Forbes)

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