The Dow Jones Industrial Average closed more than 1,100 points on Wednesday, its worst single-day drop since June. 2020 as investors worry that US inflation is starting to affect retail firms’ earnings. Markets are also under pressure as Federal Reserve Chairman Jerome Powell said the Fed would not hesitate. to raise interest rates as much as necessary to curb inflation.
The Dow Jones Industrial Average closed at 31,490.07, down 1,164.52, or -3.57%, the S&P 500 closed at 3,923.68, down 165.17, or -4.04%, and the Nasdaq closed at 11,418.15, down 566.37, or -4.73%.
Target, a major US retailer, said First-quarter earnings per share fell to $2.19, below analysts’ estimate of $3.07, due to the impact of supply chain issues. as well as higher fuel and transportation costs. In addition, the company has to reduce product prices in order to compete with competitors in the market.
Target’s poor earnings disclosure comes just a day following Walmart. The world’s largest retailer reported lower-than-expected earnings per share in Q1 also due to the effects of inflation.
Paul Christopher, an analyst at Wells Fargo Investments said: Investors sell stocks on concerns that retail is starting to suffer from rising inflation outpacing wages. This situation may occur for a longer time than anticipated. The poor performance of the retailer reflects that. Inflation is affecting the purchasing power of consumers.
Target shares closed down 24.93 percent, losing regarding $25 billion in market value. This was the highest figure since US stock markets were hit by Black Monday on Oct. 19, 1987.
Stocks of other retailers fell following Target posted poor results. Home Depot fell 5.24 percent, Best Buy was down 10.52 percent, Walmart was down 6.79 percent, Macy’s was down 10.70 percent, Dollar Tree was down 14.42 percent.
Lowe’s, the U.S. home furnishings giant, fell 5.15 percent following it reported first-quarter revenue of $23.6 billion. Below analysts’ estimates of $237.6 billion.
In addition, trading on the New York Stock Exchange was also pressured by Mr Powell’s insistence that The Fed will not hesitate to raise interest rates as much as necessary. to control inflation from soaring so severe that it damages the economic foundation
Technology stocks that are sensitive to interest rates fall. Apple was down 5.64 percent, Amazon was down 7.16 percent, Microsoft was down 4.55%, Netflix was down 7.02 percent, and Alphabet was down 3.93 percent.