US stocks fell on Wednesday to recoup some of the gains from the previous session, after a string of disappointing quarterly results from some major retail traders weighed on the broader markets. Investors also absorbed comments from Federal Reserve officials that reaffirmed their goals to rein in inflation.
The S&P 500 fell more than 1.5%, turning lower after rising 2% the day before. The Nasdaq Composite is down 1.6%, while the Dow is down more than 400 points, or 1.4%, by mid-morning.
The moves came to the downside as some weaker-than-expected earnings results from major retailers underscored the loss that inflation is taking to corporate earnings. Target (TGT) on Wednesday lowered its full-year operating income margin forecast as input and transportation costs remain high, and estimates it could see an additional $1 billion in transportation costs this year due to higher fuel prices. It came after Wal-Mart (WMT), the largest US retailer, on Tuesday reported weaker-than-expected quarterly profit and cut its profit forecast for the year, citing higher wages, fuel and food costs. Shares of both companies sank, denting sympathy from peers including Costco (COST) and Dollar General (DG). The S&P Retail ETF (XRT) is down more than 5% on the day, and the S&P 500 segments in consumer goods and consumer discretionary goods lagged.
The disappointing results outweighed the optimism that prevailed earlier this week, when investors took in a number of optimistic reports about the US economy. At least the short-term rally on Tuesday came after a few strong reports showing that both consumer spending and manufacturing production were firmly in line. US retail sales grew 0.9% in April after an upwardly revised 1.4% monthly rise in March, indicating consumers continued spending even as consumer prices rose at the fastest rate since the 1980s. The latest US industrial production data also beat estimates with a 1.1% jump last month, or more than double the expected rise.
The reports reflected continued resilience in some key components of domestic activity and at least temporarily helped allay fears that the US economy may be imminently collapsing into deflation. The still-strong economic backdrop has given the Federal Reserve more room to raise interest rates and tighten monetary policy to cut inflation without fear of severely disrupting growth in other areas such as the labor market.
Fed Chair Powell acknowledged to the Wall Street Journal on Tuesday that while “there may be some pain involved in restoring price stability,” he believes the Fed will be able to “maintain a strong labor market.” Powell also said there was still “broad support” for two additional 50 basis point rate hikes at the Fed’s upcoming policy setting meetings, echoing his view from the Fed’s last meeting earlier this month.
“I don’t think he said anything that shocked us…but let’s not forget where we are,” Ryan Detrick, chief strategist at LPL Financial Market, said. Yahoo Finance Live said on Tuesday, Noting that the S&P 500 had fallen for six consecutive weeks before this week. “It hasn’t gone down seven straight weeks for 20 years, so we’re horribly oversold here. Then you come today and you have very strong industrial production, very strong retail sales. Things aren’t ‘not perfect, but we think a lot about the negative that’s being priced…’ It’s just a small increase for us, and we think this could be a good opportunity for some long-term investors here.”
10:39AM ET: Housing starts came in slower than expected in April amid price hikes
US home building starts and building permits declined in April, as rising interest rates and a shortage of raw materials continued to weigh on housing market activity.
The Commerce Department said Wednesday that housing starts fell 0.2% month over month in April to come in at a seasonally adjusted annual rate of 1.724 million. This came on the heels of a 2.8% rate decline in March. Single-family housing starts, a closely watched measure of primary housing construction, fell 7.3% to come in at 1.1 million.
Building permits, which indicate future homebuilding activity, fell 3.2% more than expected in April to come in at a seasonally adjusted annual rate of 1.819 million. In March, permits grew 0.3%, or an annual rate of 1.870 million.
“Starts and permits are likely to decline sharply over the next few months, tracking the decline in new home sales, which in turn comes after the continued extension in mortgage applications,” Ian Shepherdson, chief economist at Pantheon Macro Economics, wrote in a note Wednesday morning. . “It’s possible that demand hasn’t bottomed yet, allowing for the usual lag between price increases and response from potential homebuyers, so we believe sales and starts could easily drop until the end of summer. Mortgage numbers for the past year and a half, as homebuilders have taken advantage of The severe shortage of inventory in the current domestic market, but this cannot continue for much longer.”
9:34AM ET: Stocks opened lower, giving up some of Tuesday’s gains
Here are the major moves in the markets as of 9:34 a.m. ET:
Standard & Poor’s 500 (^ Salafist Group for Preaching and Combat): -47.92 (-1.17%) to 4040.93
dow (^ DJI): -313.94 (-0.96%) to 32340.65
Nasdaq (^ ninth): -167.82 (-1.40%) to 11816.70
raw (CL = F.): +1.42 dollars (+1.26%) to 113.82 dollars per barrel
He went (GC = F.): – $8.10 (-0.45%) to $1,810.80 per ounce
Treasury for 10 years (^ degeneration): +1.4 basis points to produce 2.9820%
7:42 a.m. ET: Stock futures down
Here’s where the markets are trading on Wednesday morning:
S&P 500 futures contractsES = F.): -30.25 points (-0.74%) to 4,054.50
Dow futures contractsYM = F.): -187 points (-0.57%) to 32394.00
Nasdaq futures contractsNQ = F.): -130.74 points (-1.04%) to 12,429.50 points
raw (CL = F.): +1.32 dollars (+17%) to 113.72 dollars per barrel
He went (GC = F.):- $5.70 (-0.31%) to $1,813.90 per ounce
Treasury for 10 years (^ degeneration): +2.7 basis points to produce 2.997%
7:38AM ET: Lowe’s first-quarter revenue disappointed as freezing temperatures weighed on home improvement sales
Lowe’s (LOW), the nation’s second-largest home improvement giant, posted high results that missed Wall Street expectations as below-average temperatures early this spring weighed on some demand. Shares were down 2.3% in pre-market trading.
Comparative sales fell 4% in the first quarter, Louise said, with the decline coming in more steeply than the expected 3.25% decline, according to Bloomberg data. Closely watched comparable US sales fell 3.8%. However, in the end, earnings per share of $3.51 beat expectations.
“Our sales for the quarter were in line with our expectations, with the exception of seasonal outdoor categories that were affected by the unusually cold temperatures in April,” Lowe’s CEO Marvin Ellison said in a press release. First-quarter sales were disproportionately affected by cooler spring temperatures. Now that spring has arrived, we are pleased with the improved sales trends we are seeing in May.”
Lowe’s reiterated its full-year forecast for earnings per share of between $13.10 and $13.60. Louise added that comparable sales will be in the 1% to 1% range.
7:32AM ET: Mortgage applications are down the most since February last week
US mortgage applications fell the most since mid-February last week as mortgage rates jumped to their highest level since 2009, deterring some refinance companies and buyers from the market.
The Mortgage Bankers Association’s weekly index that tracks the volume of mortgage loan applications fell 11% on a weekly basis during the period ending May 13, according to the company’s latest report. Refinancing is down 10% from the previous week and a pit by 76% compared to the same week last year. Purchases, on a seasonally unadjusted basis, were down 12% from the previous week and 15% from the same week in 2021.
“For borrowers looking to refinance, the current level of rates continues to be a significant disincentive,” Joel Kahn, associate vice president of economic and industrial forecasting at the MBA, said in a press release. Homebuyers have been put off by high rates and deteriorating affordability conditions. Moreover, general uncertainty about the near-term economic outlook, as well as recent volatility in the stock market, may delay some families in their home search.”
7:22 a.m. ET Wednesday: Target stocks fall after company cuts full-year earnings guidance due to rising costs
Target’s first-quarter earnings and full-year earnings guidance disappointed Wall Street, as higher costs are expected to continue to squeeze margins at big box retailers. Shares are down more than 20% in pre-market trading.
Target’s adjusted earnings came in at $2.19 per share for the first quarter, and came in below estimates of $3.06 per share, according to Bloomberg data. However, like retail giant Walmart, sales for the quarter still beat estimates, with same-store sales up 3.3% versus an expected 1.17% rise.
It now expects its full-year operating income margin rate to be “in a range centered around 6%,” the company said in its full-year earnings statement. That compares to a previous view of at least an 8% average operating income margin this year.
“During the quarter, we experienced unexpectedly high costs, driven by a number of factors, which resulted in profitability that came in well below our expectations, and well below where we expect to operate over time,” Target CEO Brian Cornell said in a press release. . “Despite these near-term challenges, our team remains passionately dedicated to serving and catering to our guests, giving us continued confidence in a long-term financial algorithm, which forecasts single-digit revenue growth and an operating margin rate of 8% or higher over time.”
6:10 PM ET Tuesday: Stock futures resume lower
Here’s where the markets are trading on Tuesday night:
S&P 500 futures contractsES = F.): +9.5 points (+0.23%) to 4094.25
Dow futures contractsYM = F.): +67 points (+0.21%) to 32648.00
Nasdaq futures contractsNQ = F.): +27 points (+0.21%) up to 12587.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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