New black session on Wall Street, one of the worst since 2020 – 05/18/2022 at 22:42

Facade of the New York Stock Exchange (AFP/ANGELA WEISS)

Wall Street had another black session on Wednesday, one of the worst since 2020, which began a day after recovering from a series of bad announcements from major retailers that raised concerns about consumption and corporate profits.

According to the final results, the Dow Jones fell 3.57% to 31,490.97 points.

The Nasdaq fell 4.73% to 11,418.15 before falling 5% shortly before the close. The heavily technologically-colored index is now 30% below its peak. The S&P 500 shed 4.03% to drop below 4000 to 3924.18.

Target Supermarkets’ impressive drop (-24.87% to $161.73) – a rare depreciation in the retail sector – caught the attention of investors as it showed how rising prices are beginning to take a toll on consumption and corporate profits.

The chain said its quarterly profit was halved, and its boss Brian Cornell complained about the increase in costs. He warned that sales would drop in 2023. The cost of fuel and freight for the group jumped by a billion dollars.

“We started the session halfway because Target presented these terrible profit prospects,” commented Carl Heling of LBBW.

“Then the sell-off in the market became self-sustaining, and the more the indices fell, the more the market worried about future earnings, operating margins, recession and so on,” he continued.

The collapse of Target, a mid-range chain of stores, echoed the disappointing performance of Walmart (-6.84% to $122.36), the number one discount retailer more popular with low-income people, more worrying investors.

“People are buying less expensive goods and more and more are turning to white label products,” said Grigory Volokhin, citing the words of the chain’s management.

“Low income is Walmart, middle income is people who buy at Target, so it moves up the pyramid,” analyst Meeschaert said, speaking about the impact of inflation on consumer spending.

“Reality is not good for consumption, we have to put up with it,” he added.

Other brands paid the price, Costco, a wholesale distributor, lost 12.45% to $429.40, Best Buy, an electronics specialist, also lost nearly 11%, while $1 retailer, Dollar Tree, fell 14%. .42%.

Eleven sectors of the S&P 500 fell in the red, starting with non-essential goods and services (-6.60%), a rarely seen drop and information technology (-4.74%).

Big tech companies such as Amazon (-7.16% to $2142.25), Apple (-5.64% to $140.82), Netflix (-7.02% to $177.19) USA), fell.

-Carryover of expenses-

After seven weeks of losses and this new brutal drop, the Nasdaq, which includes a number of tech stocks, is back to November 2020 levels. are the lowest since March 2021.

“Today’s selloff is tied to the ability of companies to tolerate higher costs. We were wondering, well, we kind of got a response with the results,” specifically from Target, explained Quincy Crosby, chief strategist at LPL Financial.

“Of course, consumers continue to spend, but many large retailers cannot write off labor costs and higher prices caused by a still-constrained supply chain,” she said.

“Fear of growth hovering over the market intermittently and intensifies as we begin to discount the deeper slowdown,” she said.

Yields on 10-year Treasury bills declined, reflecting the purchase of safe-haven bonds that rise in price when yields fall. They amounted to 2.87% against 2.99% before the market opened.

“Looks like we haven’t hit rock bottom yet,” complained Carl Heling. “It’s almost a little disappointing that the VIX volatility index hasn’t exploded more, as if the panic, the big panic, hasn’t happened yet,” he said. The barometer, known as the “fear index”, was about 30 points, falling below the level of early May.