The Dow Jones index tumbled 3.57% to 31,490.97 units, while the tech-heavy Nasdaq sank 4.73% to 11,418.15 points. The S&P 500 lost 4.04% and was once again below 4,000 points at 3,924.18 units.
The sharp fall of Target supermarkets’ stock (-24.93% to $161.61) – a rare plunge in the retail sector – took all the investors’ attention, as it shows that the price hike is starting to weigh on consumption and corporate earnings.
The firm saw its quarterly profit halved, and its president, Brian Cornell, complained about cost hikes. He warned that sales would be down in 2023, and noted that fuel and freight costs were up.
“Target presented this horrible earnings outlook,” commented LBBW’s Karl Haeling. “And then the market sell-off fed back and the more the rates went down, the more the market was worried about future results, operating margins, recession, and I don’t go on…,” he added.
People are buying less and less expensive products, and are turning to generic products,” noted Gregori Volokhine of Meeschaert Financial Services.
“Small-income people are shopping at Walmart; middle-income people are shopping at Target. So (inflation) is starting to go back up the pyramid,” he noted.
“The reality is not too good for consumption. You have to be realistic,” he concluded.
After Target, the companies with the greatest losses on Wall Street were: the Costco supermarket chain, which lost 12.45%; Kohl’s, a retail chain of warehouses, which fell 11.02%; Best Buy, a specialist in electronics sales, which lost almost 11%.
All sectors of the S&P 500 went into negative territory.
Big tech names also fell: Amazon lost 7.16 percent to $2,142.25, Apple 5.64 percent to $140.82, and Netflix 7.02 percent to $177.19.
The Dow Jones and S&P 500 are at lows since March 2021. The Nasdaq is at its November 2020 level.
“The massive sell-off today (Wednesday) concerns the ability of companies to pass on higher costs. We were asking the question, and we had the answer in some form with the results” of Target in particular, summarized Quincy Krosby of LPL Financial.
In Mexico, the S&P/BMV IPC, the main index of the Mexican Stock Exchange also registered losses, with a drop at the close of the day of 1,070 points or 2.08%, for a total of 50,394.03 units.
On the other hand, the FTSE-BIVA, of the Institutional Stock Exchange, lost 2.06% or -21.85 points, to 1041.14 units.
The companies with the greatest losses during the day on the BMV were: Grupo Aeroportuario del Pacífico (GAP) with an intraday drop of 6.07%, followed by Banorte, with a 5.13% drop, and Grupo Aeroportuario del Sureste (Asur), which lost 4.54%.
Banco Regional also lost 3.78%, and Grupo Aeroportuario Centro Norte (OMA), with a loss of 3.33%.