Stock markets sell off as inflation concerns settle |  CBC News

Stock markets sell off as inflation concerns settle | CBC News

Stock markets were in a sea of ​​red on Wednesday as financial results for major retail traders indicated they were having a hard time dealing with stubbornly high inflation.

The S&P 500 fell more than four percent, its worst one-day bid since June 2020 as investors reacted to worrying signs that consumers are slowing their spending in the face of higher prices.

Shares in Target fell more than 25 percent of their value after the retailer said its profits were halved due to rising costs and supply chain problems. It was the worst day for Target stocks since Black Monday in 1987, and came the day after rival Walmart painted a similar picture the day before.

Walmart shares fell more than 11 percent on Tuesday and another seven percent on Wednesday, after the retailer warned of lower profits due to higher transportation costs and wages, as well as supply chain issues. Tuesday’s selloff was also the biggest one-day drop in Walmart stock since 1987.

The gloom caused by two cost-conscious retailers has investors worried that if they’re having trouble coping with high inflation, many must be.

“Consumer strength will be tested as both Walmart and Target indicate that rising price pressures are not easing,” said Edward Moya, analyst at foreign exchange Oanda.

The Dow Jones Industrial Average lost nearly 1,200 points, or more than three percent, and the technology-focused Nasdaq lost nearly 500 points, or more than four percent.

Since the start of the year, the Dow is down 14 percent, the Standard & Poor’s is down 18 percent, and the Nasdaq is down 28 percent, Bloomberg data shows.

“Stocks are collapsing after Wall Street’s concerns about economic growth after hearing a slew of fears of higher prices that won’t ease any time soon,” Moya said.

Statistics Canada reported on Wednesday that the country’s inflation rate rose again last month, to a 31-year high of 6.8 percent.

While the Toronto Stock Exchange did better than its US counterparts, it was not immune to selling, losing 389 points, or about 2 percent, to close just over 20,100 points late in the trading day. The Canadian benchmark has lost about seven percent of its value since the start of the year, and was at more than 22,000 points earlier this month.

“It’s a really rough day for stock markets,” said Colin Szyczinski, chief market strategist at SIA Wealth Management, in an interview with CBC News.

“Retailers in particular are starting to get squeezed between rising costs and declining demand,” he said. “We just saw a stampede of exits across the stock markets today.”

Technology stocks were hit hard

Tech shares, which surged earlier in the pandemic as the world became increasingly digital and online due to COVID-19 lockdowns, continue to falter.

Apple shares lost 6 percent to trade at their lowest level since October. Amazon shares lost seven percent and shares are now trading where they were in April 2020. Netflix lost another seven percent and is now trading at its lowest level since 2018.

Canadian tech firms also sold, with shares in e-commerce company Shopify, payment processing company Lightspeed and BlackBerry selling nearly three percent off.

The sell-off in tech stocks makes sense, Czeczynski said, because the sector “tends to benefit … when investors feel confident and when investors are willing to take risks.”

“At a time when investors are pulling back on spending, turning away from risk and becoming more defensive, [technology] tends to underperform.”

Bitcoin drops below $30,000

Bitcoin was no exception as the world’s largest cryptocurrency continued its decline, losing another five percent to trade below $30,000 for the first time since 2021.

“The speculative excesses of cryptocurrency in 2021 could represent a similar fate to risky assets, as it did when the internet bubble burst in 2000,” said Mike McGlone, an analyst at Bloomberg Intelligence.

2022-05-18 20:40:58

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