WALL STREET PLUNGES, LEAD BY TARGET AND HIGH-GROWTH STOCKS
by Noel Randewich and Amruta Khandekar
(Reuters) – The New York Stock Exchange ended sharply lower on Wednesday in the wake of a tumble in retail group Target, whose results were hit by soaring inflation, highlighting concerns over the American economy.
The Dow Jones index fell 3.57% to 31,490.07 points.
The broader S&P-500 lost 4.04% to 3,923.68 points.
The Nasdaq Composite fell for its part by 4.73% to 11,418.15 points.
The S&P-500 and the Dow Jones experienced their worst one-session declines since June 2020.
Target reported in the day a quarterly profit cut in half by rising prices and warned of the risk of further deterioration in margins.
Its stock plunged about 25%, a daily decline on a scale not seen since the October 19, 1987 “Black Friday” crash, and the group’s market capitalization was truncated by about $25 billion.
These results were published the day after its competitor Walmart announced a downward revision to its annual profit forecast.
“Seeing the results of Target, what worries people is whether others (forecasts) will have to be lowered,” commented Thomas Hayes, president of Great Hill Capital in New York.
“Consumer confidence is at a multi-year low, linked to inflation. So people are looking for signs that inflation is moderating, which Target didn’t offer them today. “, he added.
Sensitive to rising interest rates, high-growth stocks declined again, dragging down the S&P-500 and the Nasdaq.
Tesla, Nvidia, Amazon, Apple and Microsoft all declined sharply.
“At this point, the cons outweigh the pros when it comes to high-growth stocks, and the market is trying to decide how much worse it will get,” said Liz Young, chief investment officer at SoFi.
“The market fears the next six months (…) It tends to overreact on the downside”.
All major sectors of the S&P-500 declined. Soaring inflation, war in Ukraine, bottlenecks in supply chains, lockdowns in China and tightening central bank monetary policies have weighed on financial markets recently, fueling fears of a global economic slowdown.
Federal Reserve (Fed) Chairman Jerome Powell said on Tuesday that the US central bank will continue to tighten monetary policy until it sees lower inflation in the country.
Traders estimate an 85% chance that the Fed will decide in June to raise interest rates by 50 basis points.
(French version Jean Terzian)
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