Grim news from Walmart drags U.S. markets down – Winnipeg Free Press

NEW YORK — Major retailers and tech companies led stocks lower on Wall Street on Tuesday after Walmart warned inflation was hurting U.S. consumers’ purchasing power.

The selloff comes ahead of the Federal Reserve’s latest interest rate policy statement on Wednesday, when economists expect the central bank to announce another sharp rate hike as it steps up its fight against the surging inflation.

The S&P 500 fell 1.2%, erasing nearly half of the benchmark’s gains from last week. The Dow Jones Industrial Average fell 0.7% and the tech-heavy Nasdaq Composite closed down 1.9%.

FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)

Walmart fell 7.6% after the retail giant slashed its second-quarter and full-year profit outlook on Tuesday night, saying rising food and gas prices are forcing shoppers to cut back on more profitable discretionary items, especially clothing.

The retailer’s mid-quarter profit warning is rare and has raised concerns about how the highest inflation in 40 years is affecting the entire retail sector.

Stocks of other major chains also fell. Target fell 3.6%, Macy’s slipped 7.2% and Kohl’s fell 9.1%.

FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)

Investors remained deeply concerned about the impact of inflation on corporate earnings and its impact on US consumers. While Americans’ finances are relatively strong thanks to savings accumulated during the pandemic, those nest eggs are being spent on high gas and food prices.

“Walmart’s customer base is obviously probably in the bottom quarter or maybe the bottom third of income brackets,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab. “These are not the people who generate most discretionary spending anyway, but they are the people most vulnerable to inflationary pressures.”

Stock indexes were in the red early on Tuesday as traders reacted to Walmart’s announcement.

FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)

The S&P 500 fell 45.79 points to 3,921.05. The Dow fell 228.50 points to end at 31,761.54. The Nasdaq fell 220.09 points to 11,562.57.

Major indexes posted strong gains last week, fueled by mostly better-than-expected corporate earnings reports. Falling yields in the bond market also helped, easing pressure on equities after expectations of rate hikes by the Federal Reserve propelled yields higher for much of this year.

The central bank is expected to announce a rate hike of up to three-quarters of a percentage point on Wednesday, triple the usual amount. The central bank has been aggressively campaigning to stem high inflation for four decades. The expected hike would put the Fed’s benchmark rate in a range of 2.25% to 2.5%, the highest since 2018.

FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)

Bond yields were mixed on Tuesday. The two-year Treasury yield, which tends to move with Fed expectations, rose to 3.04% from 3.02% late Monday. The 10-year yield, which influences mortgage rates, fell from 2.82% to 2.80%.

Tech stocks, retailers and communications companies were among the biggest drags on the benchmark S&P 500. Microsoft fell 2.7%, Amazon 5.2% and Facebook owner Meta Platforms , by 4.5%.

Losses easily outpaced gains in health care and utilities stocks. Shares of smaller companies also fell. The Russell 2000 fell 12.53 points, or 0.7%, to finish at 1,805.25.

FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)

Investors watched the latest batch of corporate earnings reports on Tuesday.

Shares of automaker General Motors fell 3.4% after the company said second-quarter profits fell 40% from a year ago as shortages of computer chips and spare parts hampered factory production and caused the company’s sales in the United States to drop by more than 15%.

The Detroit automaker earned $1.67 billion from April to June, well below the $2.79 billion it earned a year earlier. GM was unable to deliver 95,000 vehicles during the quarter because it ran out of parts.

FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)

Shopify fell 14.1% after the Canadian e-commerce company said it was cutting 10% of its workforce, or about 1,000 employees, as it counts on an unexpected drop in sales after pandemic-fueled growth .

Tech leaders Meta, Apple and Amazon release their quarterly results later in the week.

“By the end of this week, we’ll have a lot of big tech payoffs and we’ll have a better idea of ​​how this whole industry is going to evolve,” Frederick said. “People may be hedging a little bit ahead of this big tech earnings onslaught that we’re going to get this week, and obviously there’s concern about the Fed tomorrow.”

FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)
FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)
FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)
FILE – Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the monetary policy report to the committee on Capitol Hill, June 22, 2022, in Washington. With inflation raging at its highest level in four decades and a strong labor market, the Fed is under pressure to aggressively raise interest rates. (AP Photo/Manuel Balce Ceneta, File)

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