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Wall Street ends sharply lower as Target and growth stocks sink

Stock Markets May 18, 2022 09:27PM ET
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2/2 © Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 13, 2022. REUTERS/Brendan McDermid 2/2

By Noel Randewich and Amruta Khandekar

(Reuters) - Wall Street ended sharply lower on Wednesday, with Target losing around a quarter of its stock market value and highlighting worries about the U.S. economy after the retailer became the latest victim of surging prices.

It was the worst one-day loss for the S&P 500 and Dow Jones Industrial Average since June 2020.

Target Corp (NYSE:TGT)'s first-quarter profit fell by half and the company warned of a bigger margin hit on rising fuel and freight costs. Its shares fell about 25%, losing about $25 billion in market capitalization, in their worst session since the Black Monday crash on Oct. 19, 1987.

The retailer's results come a day after rival Walmart (NYSE:WMT) Inc trimmed its profit forecast. The SPDR S&P Retail (NYSE:XRT) ETF dropped 8.3%.

"We think the developing impact on retail spending as inflation outpaces wages for even longer than people might have expected is a principal factor in causing the market sell-off today," said Paul Christopher, head of global market strategy at Wells Fargo (NYSE:WFC) Investment Institute. "Retailers are starting to reveal the impact of eroding consumer purchasing power."

Interest-rate sensitive megacap growth stocks added to recent declines and pulled the S&P 500 and Nasdaq lower. Amazon (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA) Inc dropped close to 7%, while Apple (NASDAQ:AAPL) fell 5.6%.

"The cons outweigh the pros for growth stocks at this particular moment, and the market is trying to decide how bad it's going to get," said Liz Young, head of investment strategy at SoFi. "The market is fearful of the next six months. We may find out that it doesn't need to be as fearful as this, and markets do tend to overreact on the downside."

All of the 11 S&P 500 sector indexes declined, with consumer discretionary and consumer staples leading the way lower, both down more than 6%.

Rising inflation, the conflict in Ukraine, prolonged supply chain snarls, pandemic-related lockdowns in China and monetary policy tightening by central banks have weighed on financial markets recently, stoking concerns about a global economic slowdown.

Wells Fargo Investment Institute on Wednesday said it expects a mild U.S. recession at the end of 2022 and early 2023.

Federal Reserve Chair Jerome Powell vowed on Tuesday that the U.S central bank will raise rates as high as needed to kill a surge in inflation that he said threatened the foundation of the economy.

Traders are pricing in 50-basis point interest rate hikes by the Fed in June and July.

Unofficially, the S&P 500 declined 4.04% to end the session at 3,923.68 points.

The Nasdaq declined 4.73% to 11,418.15 points, while Dow Jones Industrial Average declined 3.57% to 31,490.07 points.

GRAPHIC-The S&P 500's busiest trades (https://fingfx.thomsonreuters.com/gfx/mkt/zdvxowdgapx/SPX_by_busiest_trades.png)

The S&P 500 is down about 18% so far in 2022 and the Nasdaq has fallen about 27%, hit by tumbling growth stocks. Almost two-thirds of S&P 500 stocks are down 20% or more from their 52-week highs, according to Refinitiv data.

Wall Street's recent sell-off has left the S&P 500 trading at around 17 times expected earnings, its lowest PE valuation since the 2020 sell-off caused by the coronavirus pandemic, according to Refinitiv data.

GRAPHIC-S&P 500's forward PE dips below 10-year average (https://fingfx.thomsonreuters.com/gfx/mkt/gkplgzwqlvb/Pasted%20image%201652888821996.png)

The CBOE volatility index, also known as Wall Street's fear gauge, rose to 31 points after falling for six straight sessions.

Volume on U.S. exchanges was 12.5 billion shares, compared with a 13.4 billion average over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 5.09-to-1 ratio; on Nasdaq, a 3.52-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and 37 new lows; the Nasdaq Composite recorded 25 new highs and 242 new lows.

Wall Street ends sharply lower as Target and growth stocks sink
 

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Comments (14)
jack bay
jack bay May 18, 2022 7:42PM ET
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i buy if lower
Marco cuevas
Marco cuevas May 18, 2022 6:40PM ET
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Deleted my subway comment? You guys are cold....lol
Andres Guadamuz
Andres Guadamuz May 18, 2022 3:15PM ET
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Time to buy for long term investors.
Ric Later
riclater211 May 18, 2022 3:15PM ET
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Finally someone who thinks. Thank you
tiago quental
tiago quental May 18, 2022 3:15PM ET
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Not yet.. you'll see
Andres Guadamuz
Andres Guadamuz May 18, 2022 3:15PM ET
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Time to buy for long term investors.
RAMAKRISHNA RAO VENGALA
RAMAKRISHNA RAO VENGALA May 18, 2022 1:48PM ET
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Wild moves hell of the Wall Street. USA stock exchanges should be closed for 1 year to safeguard the other world Exchanges.
First Last
First Last May 18, 2022 1:48PM ET
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Or Putin can shut down his military for a year for less war crimes and better global economy.
First Last
First Last May 18, 2022 1:48PM ET
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Vengala is anti-free market.  Cvnt is anti-freedom.  This is brains on foreign propaganda.
Marco cuevas
Marco cuevas May 18, 2022 1:19PM ET
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Boy if your a short term investor and you need some of your money now I feel for you hedge funds not giving the nasdaqq any room to breathe.
Kevin Parker
Kevin Parker May 18, 2022 1:09PM ET
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Things are headed back to pre-covid values, nothing wrong here. The stimulus has ended so this is a logical next step for the markets.
simone scelsa
simone scelsa May 18, 2022 1:09PM ET
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they are going far below 2019 levels. The global economy is far worse now
Gus McCrae
Gus McCrae May 18, 2022 1:09PM ET
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far worse than when the entire world went into lockdown???
Brad Albright
Brad Albright May 18, 2022 1:09PM ET
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Absolutely correct. The Fed rigging of the stock market is coming to an end. We should be glad.
Darrell Peterson
Darrell Peterson May 18, 2022 12:57PM ET
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"Until we have clarity (on fed) , the markets are going to continue to be volatile ". Powell on Tuesday vowed to raise rates as high as needed to ***a surge in inflation. Sounds pretty clear to me Brooke. Iceberg dead ahead captain.
Brad Albright
Brad Albright May 18, 2022 12:57PM ET
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It is clear, although many people appear not to be listening. Although, I don't think an iceberg is necessarily in our path.
Mitchel Pioneer
Mitchel Pioneer May 18, 2022 12:49PM ET
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And here come savvy "investors," right on schedule, to join the magic show and mitigate the loss.  Next up, the criminal miracle "in late trade".
First Last
First Last May 18, 2022 12:49PM ET
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Wrong again
Fuzzy Lumpkin
Fuzzy Lumpkin May 18, 2022 12:36PM ET
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Welp. I just lost 5% in a day. Time to give up on home ownership.
 
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