Wall Street accelerates its decline after the previous day’s rebound, worried about consumption – 05/18/2022 at 18:21

Wall Street accelerates its decline after the previous day's rebound, worried about consumption - 05/18/2022 at 18:21


The New York Stock Exchange accelerated its decline in the middle of the session on Wednesday, potentially erasing the gains of the substantial rebound of the previous day, due to profit taking and the announcement of disappointing results of companies in the distribution sector, which worry for consumption, the engine of the American economy.

Around 4:00 p.m. GMT, the Dow Jones index lost 2.42% and the Nasdaq, with strong technological coloring, fell 3.32%, while the S&P 500 lost 2.60%.

On Tuesday, the indices had rebounded, driven by technology and the attraction of bargains, after seven weeks of losses for the Nasdaq.

The Dow Jones gained 1.34% to 32,654.09 points, the Nasdaq jumped 2.76% to 11,984.52 points and the S&P 500 advanced 2.02% to 4,088.85 points.

“US stocks tumble on disappointing results from Target and weaker-than-expected revenue at Lowe’s, with both retailers warning of mounting cost pressures,” Schwab analysts said.

The spectacular fall in Target supermarket shares (-25% to $160) — a rare magnitude of depreciation in the retail sector — held investors’ attention as it showed how much price increases are beginning to weigh on consumption and corporate profits.

The chain accused a halving of its quarterly profit and its boss, Brian Cornell, complained of cost increases. He warned that sales would fall in 2023. Fuel and freight costs jumped by a billion dollars for the group.

“By saying this, the bosses of the distribution will face a huge loss of confidence!” Worried Gregori Volokhine of Meeschaert Financial Services. “This is the biggest drop in the stock since 1987,” said the analyst.

Investors were also digesting statements on Tuesday from Jerome Powell, the head of the US central bank (Federal Reserve, Fed), which, as National Securities’ Art Hogan put it, “left no doubt about the Fed’s resolve tame inflation by raising rates or doing something else”.

“Mr. Powell also acknowledged that it would be painful – perhaps with a small increase in the unemployment rate – but that it was worth it, because he believes that price stability is the bedrock of the economy,” said the analyst again.

The president of the monetary institution affirmed, during a conversation with the Wall Street Journal, that the Central Bank will tighten its monetary conditions sharply until there is “clear evidence” that inflation is slowing down. .

For Peter Cardillo of Spartan Capital, “the decline in the indices reflected a combination of factors, including profit taking by investors, bad news from companies and a poor indicator with the fall in housing starts”.

The collapse of Target, a chain of mid-range stores, echoed the disappointing results of Walmart, the number one discount retailer more popular among lower incomes, which worried investors more.

“People are buying expensive products less and less and are increasingly turning to white label products,” noted Gregori Volokhine.

“Low incomes are Walmart, middle incomes are people who buy at Target, so it’s going up the pyramid,” noted the Meeschaert analyst.

“The reality is not very good for consumption, we have to face it,” he added.

Another store brand, Lowe’s, specializing in home furnishings, was sanctioned by investors (-5.61% to 183 dollars), after also announcing mixed results with a decline in quarterly sales of 3%.

In China, Premier Li Keqiang has called for “urgent” support for the country’s struggling economy. He urged local authorities on Wednesday to “reinforce their sense of urgency” and launch new measures to support a national economy battered by anti-Covid restrictions.

Yields on 10-year Treasuries fell sharply reflecting purchases of safe-haven bonds, the price of which rises when their yields fall. They stood at 2.91% against 2.99% before the market opened.