Dow drops 1,000 points on renewed inflation fears

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Stocks fell in late afternoon trading on Wall Street, led by sharp declines at retailers as Target tumbled after posting a solid quarterly earnings report.

The Dow Jones Industrial Average was down 1,100 points, or 3.4%, to 31,536 as of 14:00 EST. The S&P 500 fell 3.9% and the Nasdaq fell 4.5%.

The target lost a quarter of its value after reporting earnings that fell well below analysts’ forecasts and citing higher costs. The report comes a day after Walmart said its profits were affected by higher costs. Walmart, the nation’s largest retailer, fell 6.6%, adding to its losses on Tuesday.

Weak reports have raised concerns that high inflation is squeezing a wide variety of businesses and could further reduce their profits. They also align with the increasingly hawkish stance of the Federal Reserve, with President Jerome Powell. saying On Tuesday, he said the bank may consider “acting more aggressively” to raise rates if inflation doesn’t fall quickly.

“Concerns about inflation and a hawkish Fed are nothing new, but now you have the recipe for a big down day when you add in concerns about profit margins and the impact of inflation on the consumer,” said Ryan Detrick, chief market strategist at LPL Financial. , in an e-mail.


Rising gas and food prices disappointing in the face of inflation

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Retailers suffered the biggest losses. The Dollar Tree fell 16.8% and the Dollar Overall fell 11.3%. Best Buy fell 9.3% and Amazon fell 5.5%. Tech stocks also fell drastically. Apple lost 4.2%. Houseware and grocery manufacturers also fell sharply, with Kroger losing 5.6% and Procter & Gamble 4.4%.

The disappointing report from Target comes a day after the market applauded an encouraging report from the Commerce Department that showed retail sales soaring in April.

Yellen: ‘Challenging and uncertain’ outlook

Utilities fared better than the rest of the market as investors shifted money to investments deemed less risky.

By many measures, the economy remains healthy. Consumer spending, which drives much of economic activity, remains strong, unemployment is low and workers are empowered to change jobs. However, many economists worry that high energy and food prices will be a barrier to growth.

Treasury Secretary Janet Yellen on Wednesday in your name The global economic outlook is “challenging and uncertain.”

“Higher food and energy prices have stagflationary effects, such as suppressing production and spending and raising inflation all over the world,” he said at a press conference.

Stocks are struggling to come out of the last six weeks’ slump amid growing concerns for investors. Trade is volatile on a daily basis, and data on retailers and consumers are closely watched by investors trying to determine the impact of inflation and whether it could lead to a slowdown in spending. A bigger-than-expected hit in spending could indicate sluggish economic growth ahead.


MoneyWatch: Is the US heading for another recession?

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The Federal Reserve is trying to soften the impact of the crisis. Highest inflation in 40 years by raising interest rates. But investors are concerned that if the central bank raises rates too high or too quickly, it could cause a recession. As Russia’s invasion of Ukraine puts even more pressure on oil and food prices, concerns remain about global growth due to the COVID-19 lockdowns in China. worsening supply chain problems.

The United Nations is cutting its global economic growth forecast for this year significantly from 4% to 3.1%. The downgrade is broad-based, including the world’s largest economies such as the USA, China, and the European Union.