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Wall Street ends sharply lower as target and growth stocks fall

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Reuters

Noel Randewich and Amruta Khandekar

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Wall Street ended sharply lower on Wednesday, with Target losing about a quarter of its market capitalization and highlighting concerns about the US economy after the retailer became the latest victim of rising prices.

It was the worst one-day loss for the S&P 500 and Dow Jones Industrial Average since June 2020.

Target Corp’s first-quarter profits fell by half, and the company warned of a wider margin due to rising fuel and freight costs. Shares fell about 25% and lost about $25 billion in market cap, in their worst session since the Black Monday crash on October 19, 1987.

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The retailer’s results come a day after rival Walmart Inc cut its profit forecast. The SPDR S&P Retail ETF fell 8.3%.

“We think the evolving impact on retail spending, as inflation has outpaced wages for even longer than people might have anticipated, is a major factor in driving the current market sell-off,” said Paul Christopher, head of global sales. market strategy at Wells Fargo Investment Institute. “Retailers are beginning to reveal the impact of the erosion in consumer purchasing power.”

Interest-rate-sensitive mega-cap growth stocks contributed to recent declines, dragging the S&P 500 and Nasdaq lower. Amazon, Nvidia and Tesla Inc fell nearly 7%, while Apple fell 5.6%.

“The downsides outweigh the benefits for growth stocks right now, and the market is trying to decide how bad it’s going to get,” said Liz Young, head of investment strategy at SoFi. “The market is afraid for the next six months. Maybe we’ll find out it doesn’t have to be that scary, and markets tend to overreact to a downtrend.”

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All 11 sector indices of the S&P 500 fell, with consumer discretionary and consumer staples leading the way, both by more than 6%.

Rising inflation, the conflict in Ukraine, protracted supply chain turmoil, pandemic-related lockdowns in China and monetary policy tightening by central banks have weighed on financial markets of late, fueling concerns about a global economic slowdown .

Wells Fargo Investment Institute said Wednesday it expects a mild recession in the US in late 2022 and early 2023.

Federal Reserve Chairman Jerome Powell promised Tuesday that the U.S. central bank will raise interest rates as high as necessary to end a rise in inflation that he said was threatening the bottom line of the economy. .

Traders are anticipating a 50 basis point rate hike by the Fed in June and July.

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Unofficially, the S&P 500 fell 4.04% to close out the session at 3,923.68 points.

The Nasdaq fell 4.73% to 11,418.15 points, while the Dow Jones Industrial Average fell 3.57% to 31,490.07 points.

The S&P 500 is down about 18% so far in 2022 and the Nasdaq is down about 27%, hit by declining growth stocks.

The recent Wall Street sell-off has led the S&P 500 to trade at about 17 times earnings forecast, the lowest PE valuation since the 2020 selloff due to the coronavirus pandemic, according to data from Refinitiv.

The CBOE volatility index, also known as the Wall Street fear meter, rose to 31 points after falling for six consecutive sessions.

Volume on US stock exchanges was 12.5 billion shares, compared to an average of 13.4 billion over the past 20 trading days.

The number of declining issues surpassed those advancing on the NYSE by a ratio of 5.09 to 1; on Nasdaq, a 3.52-to-1 ratio favored decliners.

The S&P 500 posted a new 52-week high and 37 new lows; the Nasdaq Composite recorded 25 new highs and 242 new lows.

(Reporting by Amruta Khandekar and Devik Jain in Bengaluru and by Noel Randewich in Oakland, California; editing by Shounak Dasgupta and Lisa Shumaker)

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