Sometimes it only takes one stock to bring the worst fears of the market to life. On Wednesday, that stock was the target.
It was a day straight from investors ’nightmares. The
Dow Jones Industrial Average
Decreased by 1,164.52 points or 3.6%, while
Decreased by 4%, and
Decreased by 4.7%. June 11, 2020 was the worst day for the S&P 500 and Dow, with only seven S&P 500 stocks ending the day.
And it’s mostly, if not, due to earnings from Target (Ticker: TGT). The big-box retailer not only missed earnings expectations but also said that margins would continue to decline due to inflation. It was the last, more than the previous one that shocked investors, sending the stock down 25% on Wednesday. From there, it was easy to extrapolate target issues to a wider market.
“Today’s broad-based market raises concerns about the ability of sales companies to pass with higher costs, something that was questioned but somewhat answered with retailer earnings reports,” wrote Quincy Crosby, chief equity strategist at LPL Financial. “[But] Many of the top retailers are unable to keep up with the high labor costs and high prices still created by a limited supply chain.
The problem extends to consumers, and not just to retailers like Target. Although sales were strong, higher costs caused revenue to be missed and margins to fall, which is similar
(WMT) released its own earnings on Tuesday. The problem, it seems, is that inflation is forcing consumers to spend more on food and less on more profitable consideration items, says MKM analyst Bill Kirk. “Considerable parts of the target seem to be under a lot of pressure, and food stability is not enough because of the light mix,” he wrote. “With Target and Walmart’s results, we believe prudent retailers and third-brand companies will be under more pressure than staple retailers.”
The market fell a day after the stocks ended with strong gains – the Dow rose 1.3%, the S&P 500 rose more than 2% and the Nasdaq rose 2.8%. The fourth monthly gain for retail sales in the United States in April was a boost to optimism. Retail sales, however, are reversing, and Walmart and Target will not handle all the pressures discussed in their report.
Federal Reserve Chairman Jerome Powell’s remarks on Tuesday also seem to be digesting the market, suggesting that “some pain may be involved” in the Fed’s efforts to bring down the highest inflation in the United States in 40 years. Powell told a news conference hosted by The Wall Street Journal that the Federal Reserve would continue to raise interest rates until inflation was “coming down in a credible way.” Until we do, we will continue. “
David Rosenberg, a researcher at Rosenberg, writes that the market response is not exactly what it should have been. “It was interesting to see that the risk-on sentiment apparently ignored the influx of late Fed speakers – who were committed to the Fed’s plan to remove policy housing,” he explained. “After yesterday’s wide rally, there is no follow-through in US equity.”
After Wednesday’s sale, there should be a hard landing base case until further notice. “The Dow Jones Industrial Average has suffered the worst losses since 2020 because investors doubt the Fed will be able to make a soft landing because the inflation outlook could ensure more aggressive monetary policy tightening,” wrote Wonder Edward Moya.
And it all happened because of Target.
Moving Wednesday stock
(LOW) fell 5.3% when it reported a first-quarter earnings beat but missed the same-store sales forecast. Home improvement competitors
(HD) ended Tuesday with a 1.7% gain while earnings were above analysts’ expectations and it raised the guidelines for 2022, but its shares fell 5.2% in Wednesday’s trading.
Other retailers were also hit by Wednesday’s sell-off.
(COST) shares fell 12%
(DG) shares closed at 14% and 11%, respectively.
(SQ), a company formerly known as Square, fell 3.2% in Baird despite being known as Positive Fresh Peak. The company also celebrated an investor’s day on Wednesday where it outlined its vision as a broader financial services company that offers more than just paying.
Despite the upgrade from Bernstein’s Market Performance to Outperformance (MNST) is down 2.9%.
(V) dropped 2% after starting with Conviction Buy rating in Goldman Sachs.
Penn National Gaming
(PENN) decreased by 2.3% after upgrading from buy to hold at Jefferies.
Piper Sandler stock fell 6.8% after hitting a target price of $ 1,260 to 0 1,035 (TSLA).