Stocks fall as retail sales beat, earnings targets miss

U.S. stocks fell on Wednesday as Wall Street weighed a profit warning from retail leader Target over government retail sales data that showed robust consumer spending ahead of the key holiday season.

The S&P 500 (^GSPC) fell 0.8%, while the Dow Jones Industrial Average (^DJI) fell about 0.1%. The Nasdaq Composite (^IXIC), which tracks the technology, fell 1.5%.

The Commerce Department said Wednesday retail sales jumped 1.3% in October as Americans shelled out for food, gasoline and big-ticket items last month despite inflationary pressures. Economists polled by Bloomberg had expected an overall increase of 1.0% after flat activity in the previous month.

A strong print could derail the market’s uptrend, with investors likely to interpret robust spending as a sign to Federal Reserve policymakers that aggressive rate hikes may continue.

All eyes were on Target (TGT) as it plunged 13% on the back of a third-quarter earnings report that ended with a wide margin and weak outlook for the holiday quarter. The retailer has been pressured by a slowdown in consumer spending on discretionary goods and said store looting had reduced its gross profit margin by $400 million so far this year.

“During the final weeks of the quarter, sales and earnings trends moderated significantly as customer buying behavior was increasingly impacted by inflation, rising interest rates and uncertainty. economic,” Target Chairman and CEO Brian Cornell said in the earnings release. third quarter earnings performance well below our expectations.”

In other pockets of the market, the U.S. dollar lost ground while oil edged higher as geopolitical jitters eased after a Russian-made missile struck Poland on Tuesday and reignited fears of an escalation of the Russian war in Ukraine. President Joe Biden met with NATO allies at the G20 meeting in Bali, Indonesia on Wednesday and defused concerns while saying US officials will support Poland as it investigates whether the missile was fired from Russia.

Back home, stocks have held up so far this week after a softer CPI reading on Thursday spurred an outsized relief rally. October’s Producer Price Index (PPI), another key gauge of inflation, rekindled that optimism in Tuesday’s session, along with comments from members of the Federal Reserve in recent days suggesting a possible slowdown in rate hikes.

“We all have to keep in mind that Fedspeak is quite disparate at the moment, and you can have a hawkish or dovish view depending on which official you ask,” Mike Loewengart, head of model portfolio construction at Global Investment Morgan Stanley’s office, said in a note. “The market is also digesting how much inflation is affecting the consumer, with key retail revenues beating expectations and retail sales coming in.”

WASHINGTON, DC – MAY 23: (L-R) Federal Reserve Vice Chairman Lael Brainard shakes hands with Jerome Powell on May 23, 2022 in Washington, DC. (Photo by Drew Angerer/Getty Images)

On the earnings front, non-Target retail earnings have so far exceeded analysts’ estimates.

Home improvement store Lowe’s (LOW) beat analysts’ forecasts on Wednesday. Shares rose 3% at the open even as the company cut the top of its full-year revenue forecast.

Megastore Walmart (WMT) benefited from more value spending by inflation-pinched customers and a “significant” improvement in its inventory glut, while higher prices helped offset fewer transactions at Home Deposit (HD). raised its sales forecast after reporting strong demand in the third quarter.

Another set of industry peers are still on deck to report, with results from Victoria’s Secret (VSCO) due out on Wednesday. Nvidia (NVDA) is another major headliner on the earnings ledger.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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