Wall Street falls as Walmart warning rattles retail stocks

Exceptionally weak consumer confidence data also fuelled fears about spending



By Reuters

Published: Wed 27 Jul 2022, 7:05 AM

US stocks ended sharply lower on Tuesday, as a profit warning by Walmart dragged down retail shares. Exceptionally weak consumer confidence data also fuelled fears about spending.

Walmart shares sank 7.6 per cent after the retailer cut its full-year profit forecast late on Monday. Walmart blamed surging prices for food and fuel, and said that it needed to cut prices to pare inventories.

Shares of Target Corp fell 3.6 per cent and Amazon.com Inc dropped 5.2 per cent, while the S&P 500 retail index declined by 4.2 per cent.

On Tuesday, data showed that US consumer confidence dropped to nearly a 1-1½-year low in July, amid persistent worries about higher inflation and rising interest rates.

"The majority of companies that reported today beat (on) earnings, and that's been the case. But of course there have been some warnings, and that's what the market is focusing on," noted Peter Cardillo, Chief Market Economist at Spartan Capital Securities in New York.

Amazon, which said it would raise fees for delivery and streaming service Prime, in Europe, by up to 43 per cent a year, was the biggest drag on the Nasdaq and S&P 500, while consumer discretionary fell 3.3 per cent and led to declines among S&P 500 sectors.

The Federal Reserve started a two-day meeting, and on Wednesday it is expected to announce a 0.75 percentage point interest rate hike to fight inflation. Investors have worried that aggressive interest rate hikes by the Fed could tip the economy into recession.

The Dow Jones Industrial Average fell by 228.5 points, or 0.71 per cent, to 31,761.54, the S&P 500 lost 45.79 points, or 1.15 per cent, to 3,921.05 and the Nasdaq Composite dropped by 220.09 points, or 1.87 per cent, to 11,562.58.

A busy week for earnings also included reports from Alphabet Inc and Microsoft Corp after the bell. Shares of Microsoft were down 0.5 per cent, in after-hours trading, while Alphabet was up 3 per cent, following the companies' results. Microsoft ended the regular session down 2.7 per cent, while Alphabet ended 2.3 per cent lower on the day.

Investors had been looking to see if this week's earnings news from mega-cap companies might help the stock market sustain its recent rally.

Earnings from S&P 500 companies were expected to have risen 6.2 per cent for the second quarter from the year-ago period, according to Refinitiv data.

Also, during the regular session, Coca-Cola Co gained 1.6 per cent, after the company raised its full-year revenue forecast. McDonald's Corp rose 2.7 per cent after beating quarterly expectations. 3M Co rose 4.9 per cent after the industrial giant said it planned to spin off its healthcare business. General Electric Co gained 4.6 per cent after the industrial conglomerate beat revenue and profit estimates.

In other outlooks, the International Monetary Fund cut global growth forecasts again.

Volume on US exchanges was 9.60 billion shares, compared with the 10.93 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 1.73-to-1 ratio; on Nasdaq, a 1.72-to-1 ratio favoured decliners.

The S&P 500 posted 1 new 52-week high and 30 new lows, while the Nasdaq Composite recorded 39 new highs and 138 new lows.

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