All U.S. stock indexes took a major dive on Wednesday due in part to less than expected quarterly results from major retailers due to higher fuel costs and higher wages. This decline comes as Fed Chair Jerome Powell suggested on Tuesday that interest rates will likely rise even further.
Most notably, shares of Target Corp slid 26% after reporting earnings came up much shorter than expected.
“The Target miss on top of misses from Walmart and Amazon certainly is saying something to investors about profit margin pressure,” Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said. “I think there’s significant concerns that higher inflation, higher costs are starting to erode the earnings potential at the corporate level.”
Investors also were taking a fresh look at comments from Powell, who on Tuesday spoke of possible “pain” for Americans as the central bank moves resolutely to bring down inflation by raising interest rates. He was speaking at The Wall Street Journal’s Future of Everything event.
Lower than expected numbers from top retailers force Wall Street to grapple with the idea that the global economy is heading for a recession. Though the debate is far from settled, it has rattled stocks and other risky assets throughout the year.
Russia’s war in Ukraine and China’s zero-Covid strategy has also jolted markets and has led to widespread declines.
