Dow fell more than 1,000 points after disappointing retail earnings

Major retailers said their profits were hit by rising costs, slowing sales and supply chain disruptions. shares Goal Sink 27% after the company announced a quarterly Missed Gains Analysts forecast, put it on its right track Worst performance for a day Since Black Monday in 1987. Shares of Dollar Tree, Dollar General and Costco Wholesale have also been on track to post their biggest declines in years.

The retailer’s results have prompted Wall Street to wrestle again with the idea that the global economy could be headed into a recession. Although the controversy remains unresolved, it rattled stocks and other risky assets throughout the year.

On top of investors’ minds is decades-old high inflation in the US, how willing policymakers are to tighten financial conditions to subdue it and what that means for economic growth. Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank’s determination to fight inflation should not be questioned, Even if it means raising the unemployment rate.

“Inflation affects every aspect of the earnings report, whether it’s on the transportation side or the supply chain disruption,” said Nick Giacomakis, president and founder of NEIRG Wealth Management. “Customers are no longer buying the more expensive items they normally buy. It all turns into the earnings report.”

Russia’s war in Ukraine and China’s non-proliferation strategy have also shaken the markets, and the downturns are widespread. Bonds, which are usually havens, are falling along with stocks.

Walmart shares fell 6.6%, extending Tuesday’s drop by 11% after the retailer reported it was getting Shrinking due to rising food prices and other increased costs. Lowe’s shares fell 5.4% after the home improvement retailer reported that comparable store sales were weaker than expected.

“We are seeing a continuous shift in the composition of consumption, away from goods and back towards services,” said Garrett Melson, portfolio strategist at Natixis Investment Managers. “Of course, this will affect merchandise retailers.”

The Discretionary Consumer Goods and Consumer Goods sectors were the worst performers on Wednesday, falling 6.8% and 6%, respectively. Both sectors were on track to post their biggest one-day losses since March 2020.

“We expect growth to start to slow over the next few months,” said Salman Ahmed, global head of macroeconomics at Fidelity International, adding that he expects the Fed’s actions to help curb inflation. “Then the Fed’s next step will be to focus on the growth shock.”

He said the mix of fears that plagued the markets had prompted Mr. Ahmed to adopt a more cautious investment approach in recent weeks.

Investors are also watching whether Russia’s war against Ukraine could heighten geopolitical tensions. Finland and Sweden I officially applied for membership in NATO On Wednesday, a move that, if approved, would fundamentally change the security landscape in northern Europe.

In the bond markets, the return on the index 10-year treasury bonds It fell to 2.892% from 2.969% Tuesday. Yields and prices move inversely.

Brent crude, the international oil standard, fell 2.7 percent to $108.95. Oil prices have been highly reactive in recent months for both Russia’s war against Ukraine, which may disrupt supplies, and the shutdowns of major Chinese cities reducing demand. Shanghai government started Preparing the city for reopening.

Offshore, the Stoxx Europe 600 closed down 1.1%. The British pound fell by about 0.6% against the dollar after new figures showed that the annual rate of inflation in the United Kingdom reached Highest level in four decades 9% in April as higher energy prices were fueled by home utility bills.

In Asia, new data showed that Japan’s economy shrinks In the first three months of this year, when restrictions related to the resurgence of Covid-19 infections hampered consumer spending. Despite this, Japan’s Nikkei 225 index closed 0.9% higher.

Both Cosby in South Korea and Hang Seng in Hong Kong added 0.2% on Wednesday. China’s Shanghai Composite Index is down 0.2%.

Write to Caitlin Ostroff at [email protected] and Orla McCaffrey at [email protected]

Corrections and amplifications
Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank’s determination to combat inflation should not be called into question. An earlier version of this article incorrectly stated that Mr. Powell made this statement on Wednesday. (Corrected May 18).