ASX to plunge as Wall Street plunges on inflation fears

Target lost a quarter of its value after reporting earnings well below analysts’ forecasts. In a sign of the impact of inflation, particularly on shipping costs, Target said its first-quarter operating margin was 5.3%. He expected 8% or more. The company also said consumers have returned to more normal spending habits, ditching TVs and appliances and buying more toys and travel-related items.

The report comes a day after Walmart said its profits were hit by rising costs. The country’s biggest retailer fell another 6.8%, adding to its losses on Tuesday.

“A lot of people try to guess the background. Dips occur when there is no one left to sell.

Sam Stovall, chief investment strategist at CFRA

The weak reports have fueled fears that the persistent rise in inflation is putting greater pressure on a wide range of companies and could further reduce their profits.

“These retailers have to balance the portion of higher inflation to be passed on to consumers versus eating it, which raises questions about profitability on the part of businesses and that leads to some of these lingering valuation questions for the market,” said Willie Delwiche, investment strategist at All Star Charts.

Other major retailers also racked up heavy losses. Dollar Tree fell 14.4% and Dollar General 11.1%. Best Buy fell 10.5% and Amazon 7.2%.

Tech stocks, which led the market rally a day earlier, were the biggest drag on the S&P 500. Apple lost 5.6%.

In total, more than 95% of S&P 500 stocks closed lower. Utilities also weighed on the index, but not as much as the other 10 sectors, as investors shifted money to investments considered less risky.

Target shares fell nearly 25%.Credit:PA

Bond yields fell as investors shifted money to lower risk investments. The 10-year Treasury yield fell to 2.88% from 2.97% on Tuesday evening.

Target’s disappointing report comes a day after the market cheered an encouraging report from the Commerce Department that showed retail sales rose in April, driven by higher sales of cars, electronics and increased spending in the restaurants.

Stocks have struggled to emerge from a slump over the past six weeks as worries mount for investors. Trading was choppy on a daily basis and all retailer and consumer data is being watched closely by investors as they try to determine the impact of inflation and whether it will lead to a slowdown in spending. A larger-than-expected impact on spending could signal slower economic growth ahead.

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“Granted, consumers are still spending, but many of the major retailers are unable to pass on labor costs and higher prices driven by a still constrained supply chain,” said Quincy Krosby. , chief equity strategist for LPL Financial.

The Federal Reserve is trying to soften the impact of the highest inflation in four decades by raising interest rates. On Tuesday, Fed Chairman Jerome Powell told a Wall Street Journal conference that the US central bank “should consider acting more aggressively” if inflation did not subside after previous increases. rate.

Investors fear that the central bank could cause a recession if it raises rates too high or too quickly. Concerns persist over global growth as Russia’s invasion of Ukraine puts further pressure on oil and food prices, while lockdowns in China to stem COVID-19 cases worsen supply chain issues.

The United Nations dramatically lowers its forecast for global economic growth this year from 4% to 3.1%. The downgrade is widespread and includes the world’s largest economies such as the United States, China and the European Union.

PA

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