Dow Falls 800 Points, Stock Market Selloff Continues As Major Retailers Warn Of Rising Cost Pressures

May 18, 2022, 12:35pm

The stock market selloff resumed on Wednesday after several major retailers reported that their quarterly profits took a hit due to rising cost pressures.

The selloff on Wall Street intensified by the afternoon, with the S&P 500 losing 3% and the tech-laden Nasdaq losing 3.5%.

The stock of Target plunged 25% after the company warned of rising costs and supply chain issues impacting profits, with the stock on pace for its worst single-day drop in 25 years.

The news followed a gloomy outlook from Walmart on Tuesday, with the nation's largest retailer badly missing earnings expectations due to rising costs, causing shares to fall in their largest one-day drop since 1987.

Both results are weighing heavily on markets, with the S&P 500 Retail ETF falling more than 5%,amid fears that American consumers are feeling the impact of surging inflation.

Best Buy, Dollar General, Dollar Tree, Macy's and Kohl's all saw their stock prices plunge.

The market declined after the Federal Reserve Chair said the central bank won't hesitate to keep raising rates until they see inflation moderate.

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Two of the nation's largest retailers have been destroyed in the last two days as a result of the tax of inflation.

What To Watch For:

The experiences of both companies further reinforce the point that we are operating in one of the most complicated macro environments that any company or investor has had to deal with. If Walmart and Target are having these types of issues keeping up with the rapidly changing environment, who isn't?

Contra:

It's understandable that investors would feel gloomy given the steep post-earnings declines in Walmart and Target. The consumer has to be weakened if both these companies are blowing up, as the reality with consumer spending is.

After a dramatic plunge in Target stock, earnings are going to be shortfall.

After Powell said the Fed should keep raising rates, the stock market jumped 400 points.

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