US stocks fell sharply on Wednesday after another major retailer warned of rising cost pressures, confirming fears of inflation that have led major benchmarks to huge losses this year.
The Dow Jones Industrial Average lost 1,029 points, or 3.2%, averaging its first loss in four days. The S&P 500 was down 3.6%, while the Nasdaq Composite fell 4.3%.
Markets returned to heavy selling after two consecutive quarterly reports from Target and Walmart fueled investor fears of rising inflation. It’s the fifth Dow drop from more than 800 points this year, all of which happened as stock sell-offs intensified over the past month, according to data from FactSet.
“Clearly, transportation costs matter and they have an impact [some of] the biggest companies,” said Kim Forrest, founder of Bokeh Capital. “So I think investors are scratching our heads, ‘so who’s next?’ And they provide insight into what is happening with the consumer.”
Target shares fell more than 26% on Wednesday after the retailer reported first-quarter earnings far below Wall Street’s estimate due to higher fuel and compensation costs. The retailer also saw lower-than-expected sales for discretionary merchandise such as TVs.
The retailer’s report comes right after Walmart posted a profit that fell short of expectations on Tuesday, as it also cited higher fuel and labor costs. Shares of Walmart ended Tuesday 11% lower. On Wednesday, they fell another 6%.
“Consumers are being challenged,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “At the end of the year, we started to see consumers using credit cards to pay for the rise in food prices and the rise in energy prices, and it’s actually gotten a lot worse. … This is going to hurt those chain stores and Walmart is usually one of them.”
Sarah Min contributed reporting.