Wall Street Falls, US Retail Stocks Fall

NEW YORK, KOMPAS.com – Bursa stock United States or Wall Street ended in red on Wednesday (18/5/2022) trading. This decline occurred following a massive investor sell-off, due to concerns over the inflation.

The Dow Jones Industrial Average (DJIA) fell 1164.52 points, or 3.57 percent, to 31,490.07. Meanwhile, the S&P 500 tumbled 4.04 percent, to close at 3,923.68, and the Nasdaq Composite slipped 4.73 percent to 11,418.15.

Megan Horneman, chief investment officer at Verdence Capital Advisors, said the market returned to a massive sell-off after two quarterly earnings reports for department store company Target Corporation and retailer Walmart fell.

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This makes investors worried about rising inflation and reducing the profits of companies engaged in the consumer sector. The decline this time was the DJIA’s fifth drop of more than 800 points this year, and all because of the stock sell-off that has intensified in the past month.

“We started seeing at the end of the year that consumers were turning to credit cards to pay for rising food prices, rising energy prices, and it actually got a lot worse. This will be to the detriment of leading retail venues. Walmart is one of them,” Horneman said CNBCThursday (19/5/2022).

Shares of Target fell 24.9 percent, after the company reported significantly lower-than-expected 2022 quarterly earnings on Wall Street due to higher fuel costs and compensation.

Retail company Walmart also previously reported earnings in the first quarter of this year which fell, and fell short of expectations after higher fuel and labor costs. Shares of Walmart yesterday closed down 11 percent, and on Wednesday’s close was down 6.8 percent.

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“It is clear that transportation costs are important and affect (some) big companies. So I think investors are a little bit confused about this, and which companies are going to have a similar problem next?” said Kim Forrest, founder of Bokeh Capital.

At Wednesday’s close, Amazon’s stock price plunged 7.2 percent, Best Buy slipped 10.5 percent, Dollar General plunged 11.1 percent, and Dollar Tree also fell 14.4 percent. Stocks Macy’s fell 10.7 percent, while Kohl’s fell 11 percent.

Meanwhile, the household needs company, Lowe’s Companies fell 5.3 percent despite the company’s earnings report grew. However, the company noted a decline in purchases for outdoor products.

“Any company that has sales of household necessities is likely to be depressed this quarter as a lot of the additional revenue is funneled into food and energy prices,” said Jack Ablin, founding partner of Cresset Capital.

Stocks and other risky assets also came under pressure, due to inflation and the Federal Reserve’s efforts to suppress price increases through higher interest rates. This is feared will be the cause of a recession.

The yield on the 10-year US Treasury note briefly fell below 2.9 percent after briefly hitting 3 percent earlier. This happens because investors return to bonds that are considered a safe haven.

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