Wall Street Sharp Decline, Retail Sector Under Attack

On Wall Street, stock indices sharply fell on Wednesday, losing all gains from the previous day, as investors were concerned about weaker-than-expected business results from the largest American retail chains.

The Dow Jones dropped by 1,164 points or 3.57 percent, to 31,490 points, while the S&P 500 plummeted by 4.04 percent, to 3,923 points, and the Nasdaq index fell by 4.73 percent, to 11,418 points.

The largest daily drop in the S&P 500 index since June 2020 is partly due to a 25 percent decline in Target’s stock price, after the retail chain reported a sharp drop in profits in the first quarter and warned of rising fuel and transportation costs.

The day before, the largest American retail chain, Walmart, reduced its future profit estimates for the same reasons.

In all 11 major sectors of the S&P 500, stock prices fell, with the most significant declines in retail and consumer sectors, over 6 percent.

– This decline is a result of estimates regarding how a longer-than-expected period of faster inflation growth compared to wages will affect retail consumption. The results of retail chains are beginning to show the impact of weakening consumer purchasing power – says Paul Christopher, strategist at Wells Fargo Investment Institute.

The institute announced yesterday that it expects a mild recession in the American economy by the end of this year and the beginning of next year.

Rising inflation, the war in Ukraine, prolonged disruptions in supply chains, city ‘lockdowns’ in China due to the coronavirus, and the tightening of monetary policy by central banks in recent months are pressuring stock markets as they raise fears of a slowdown in global economic growth.

Among the biggest losers yesterday were the stocks of tech giants. Prices of Apple, Amazon, Nvidia, and Tesla fell between 5.5 and 7 percent.

As a result, stock indices lost all gains from the previous day.

Since the beginning of the year, the S&P 500 has fallen about 18 percent, while the Nasdaq index has plummeted 27 percent.

Nearly two-thirds of the stocks in the S&P 500 have fallen 20 percent or more from their highest level in the last 52 weeks.

European stock prices also fell yesterday. The London FTSE index weakened by 1.07 percent, to 7,438 points, while the Frankfurt DAX slid by 1.26 percent, to 14,007 points, and the Paris CAC by 1.20 percent, to 6,352 points.