The Nasdaq composite led the decline on Tuesday as stocks continue to slide after last week’s upward move. The Dow Jones Industrial Average and S&P 500 also traded lower.
New home sales released on Tuesday showed U.S. builders starting to see increased supply as sales slow. According to the report, new home sales fell more than 8% in June from the previous month and were down 17% year-over-year. Meanwhile, stocks hit 9.3 months supply, down from 5.6 months supply at the end of 2021.
“New home sales rose in the Midwest but fell the most in the West as the labor market continues to turn,” noted Jeffrey Roach, chief economist for LPL Financial. “As workers change jobs and adjust to the hybrid work environment, housing will likely weaken further in areas with high living costs.” Roach believes there are more downsides in housing and that rapidly rising borrowing costs are a major factor in weakening sales.
Nasdaq leads lower as indices retreat
Overview of the US stock market today
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Last Updated: 2:40 PM ET on 07/26/2022
The Dow Jones was trading down 0.6% about an hour before the market closed. The S&P 500 fell 1.2% while the Nasdaq lost 1.9%. The Russell 2000 Small Cap Index also struggled, but fared better than the other major indices, falling 0.3%.
Volume was higher on the Nasdaq and NYSE compared to the same time on Monday, which is a worrying sign. Stock market declines on significant volume usually signal an institutional sell-off. Meanwhile, U.S. crude oil fell 1.2% to settle below $96 a barrel. The energy sector was among the worst performers on Tuesday. But consumer discretionary stocks led the decline by a wide margin. On the upside, healthcare stocks outperformed.
Walmart shares lower profits
Dow Jones Leader Stocks walmart (WMT) fell 8%, leading the decline among blue chips after the company lowered its earnings forecast. Several other retail stocks declined in sympathy, including Target (TGT), Home deposit (HD) and best buy (BBY), down 4%, 3% and 5%, respectively.
Walmart cut its quarterly and annual profit estimates due to rising food inflation. The retailer noted that rising prices are prompting consumers to cut back on spending on general merchandise, including clothing. This prompted a sell-off of stocks like kohls (KSS) and Macy’s (M), down 7.8% and 6.5%, respectively. Meanwhile, the SPDR S&P Retail ETF (XRT) lost 4.2%.
Nasdaq Heavyweights Microsoft (MSFT) and Alphabet (GOOG) report earnings after the closing bell.
Follow Rachel Fox on Twitter at@IBD_RFox for more commentary on the Dow Jones and the stock market.