Wall Street ended sharply lower on Wednesday, with Target losing about a quarter of its market capitalization and highlighting concerns about the U.S. economy after the retailer became the latest victim of rising prices.

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

Target Corp’s first quarter profits fell by half, and the company warned of a wider margin due to rising fuel and freight costs. Shares fell about 25% and lost about $25 billion in market cap, in their worst session since the Black Monday crash on October 19, 1987.

The retailer’s results come a day after rival Walmart Inc cut its profit forecast. The SPDR S&P Retail ETF fell 8.3%.

“We think the evolving impact on retail spending, as inflation has outpaced wages for even longer than people might have anticipated, is a major factor in driving the current market sell-off,” said Paul Christopher, head of global sales. Market strategy at Wells Fargo Investment Institute. “Retailers are beginning to reveal the impact of the erosion in consumer purchasing power.”

Wall Street stocks

Interest-rate-sensitive mega-cap growth stocks contributed to recent declines, dragging the S&P 500 and Nasdaq lower. Amazon, Nvidia, and Tesla Inc fell nearly 7%, while Apple fell 5.6%.

“The downsides outweigh the benefits for growth stocks right now, and the market is trying to decide how bad it’s going to get,” said Liz Young, head of the investment strategy at SoFi. “The market is scared for the next six months. Maybe we’ll find out it doesn’t have to be that scary, and markets tend to overreact to the downside.”

All 11 sector indices of the S&P 500 fell, with consumer discretionary and consumer staples leading the way, both by more than 6%.

Rising inflation, the conflict in Ukraine, protracted supply chain turmoil, pandemic-related lockdowns in China, and monetary policy tightening by central banks have weighed on financial markets of late, fueling concerns about a global economic slowdown.

Wells Fargo Investment Institute said Wednesday expects a mild U.S. recession in late 2022 and early 2023.

Federal Reserve Chairman Jerome Powell promised Tuesday that the U.S. central bank would raise interest rates as high as necessary to end a rise in inflation that he said was threatening the bottom line of the economy.

Traders anticipate a 50 basis point rate hike by the Fed in June and July.

Unofficially, the S&P 500 fell 4.04% to close out the session at 3,923.68 points.

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

The S&P 500 is down about 18% in 2022, and the Nasdaq is down about 27%, hit by declining growth stocks. According to data from Refinitiv, nearly two-thirds of S&P 500 stocks are down 20% or more from their 52-week high.

The recent Wall Street sell-off has led the S&P 500 to trade at about 17 times the earnings forecast, the lowest P.E. valuation since the 2020 selloff due to the coronavirus pandemic, according to data from Refinitiv.

The CBOE volatility index, also known as the Wall Street fear meter, rose to 31 points after falling for six consecutive sessions.

Volume on U.S. stock exchanges was 12.5 billion shares, compared to an average of 13.4 billion over the past 20 trading days.

The number of declining issues outpaced the advancing ones on the NYSE by a ratio of 5.09 to 1; on Nasdaq, a 3.52-to-1 ratio favored decliners.

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


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