U.S. stock futures tumbled ahead of Wednesday’s overnight session after a week-long sell-off on Wall Street deepened in previous trading as disappointing retail earnings raised concerns about the impact of inflation.
Futures linked to the S&P 500 fell 0.5% after the index’s worst fall since June 2020, as all but eight benchmark stocks closed in negative territory during Wednesday’s session. Dow futures contracts fell 0.4% after the index fell nearly 1,200-points on Wednesday after closing at its lowest level since March 2021, and Nasdaq futures fell 0.8% after the tech-heavy benchmark plunged 4.7%.
These losses followed a trend of weaker-than-expected quarterly results from big-box U.S. retailers that frightened investors with the pressure of toll inflation on corporate profits and consumer spending.
Target (TGT) lost a quarter of its market value on Wednesday as the company reported much lower operating margins than analysts expected and reduced its full-year outlook due to higher transportation costs due to rising fuel prices.
“Concerned about the ability of today’s broad-based market to pass sales-off companies with high costs, something that was questioned but found some answers with retailer earnings reports,” LPL Financial Chief Equity Strategist Quincy Crosby said in an email on Wednesday. “Certainly, consumers tend to spend, but many top retailers are still unable to pass with the high labor costs and high prices created by the limited supply chain.”
Target’s report follows a earnings miss and forecast cut from Walmart (WMT) earlier this week, news that sent the retail giant’s shares down 17% in the past two days, marking the worst two-day sell-off of the stock since 1987.
“Key elements like seemingly safe haven stocks, targets and Walmart are not immune,” Cresset Capital CIO Jack Ablin told Yahoo Finance Live on Wednesday. “Investors looked at these stocks and thought they were safe havens, and now we see they probably weren’t.”
The equity market plunged on Wednesday after Federal Reserve Chair Jerome Powell’s scathing remarks at a Wall Street Journal conference earlier this week led to two more 50 basis point interest rate hikes at the upcoming central bank policy-making meeting.
Uncertainty around the pace and scale of the Fed’s rate hike cycle has put pressure on equity markets, which has continued throughout the year as investors worry about the possibility of an economic downturn if the central bank acts too aggressively. So far in 2022, the S&P 500 has again entered the bear market area, about 18% below its all-time high on January 3, while the Dow has fallen about 14% over the same period and the Nasdaq has plunged deeper into a bear market – its record closing price in November. 28% less.
“Chairman Powell’s scathing remarks yesterday afternoon and Target’s narrow profit margin were too high to manage the market,” Independent Advisory Alliance CIO Chris Zaccarelli said in an email note. “Today’s sell-off shows that growth prospects are still engulfing investors and this year the Fed is not behind them.”
6:17 pm ET Wednesday: Futures open slightly lower after Wall Street sales resume
Here the stock futures were in extended trading on Wednesday:
S&P 500 Futures (EN = F): -5.00 (-0.13%) to 3,917.75
Dow Future (YM = F): -35.00 (-0.11%) to 31,405.00
Nasdaq Future (NQ = F): -28.50 (-0.4%) to 11,907.50
Crude (CL = F): – $ 0.50 (-0.46%) to $ 109.09
Gold (GC = F): – $ 0.90 (-0.50%) to $ 1,815.00 per ounce
10 year treasury (^ TNX): -8.2 bps Yield 2.8860%
Alexandra Semenova is a reporter for Yahoo Finance. Follow him on Twitter Alexandrandnik
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