August 16, 2022

Indexes Fall As Investors Spooked By Walmart Warning

On Tuesday, US equities ended the day sharply lower, as retail shares were weighed down by a profit warning from Walmart.

Moreover, spending fears were also on the rise, as consumer spending data turned out to be weak.

Share decline

There was a 7.6% drop in the shares of Walmart Inc. after the retail slashed its profit forecast late on Monday.

The retailer said that the rise in prices of food and fuel was responsible, as consumers had cut back their spending, due to which it would pare inventories by cutting prices.

There was a 3.6% decline in the shares of Target Corp. and a 5.2% drop in Amazon.com Inc., while a 4.2% fall was also seen in the S&P 500 retail index.

Data showed on Tuesday that US consumer confidence had fallen to almost a two and a half year low because of persistent worries about increasing interest rates and high inflation.

Market analysts said that while a majority of the companies were beating earnings expectations, there are some warnings and investors seem to be focusing on those.

The biggest drag on the S&P 500 and Nasdaq indexes was Amazon, which said that it would hike streaming and delivery fee in Europe by almost 43% this year.

Meanwhile, a 3.3% decline was seen in the consumer discretionary sector, which was leading to losses in all sectors of the S&P 500.

Index performance

The two-day meeting of the US Federal Reserve has already begun and is expected to end with an interest rate increase of 75 basis points for combating inflation.

Investors have been concerned that aggressive hikes in the interest rate could result in an economic recession.

There was a 0.71% drop in the Dow Jones Industrial Average, which declined by 228.5 points to reach 31,761.54. The S&P 500 dropped by 1.15%, which was a loss of 45.79 points, taking it to 3,921.05.

A 1.87% drop in the Nasdaq Composite saw it come down to 11,562.58 points, after losing 220.09 points.

This week is a busy one for earnings, as reports from Microsoft Corp and Alphabet Inc. are also expected after the bell.

After-hours trading saw Alphabet’s shares rise by 3%, while Microsoft’s shares were down by 0.5%. The regular session saw the former down by 2.3% and the latter lose 2.7%.

Stock market impact

Investors were looking forward to seeing if there would be any impact on the stock market of the earnings news this week from mega-cap companies.

There was a 6.2% rise expected in earnings in the second quarter of S&P 500 companies, as compared to a year ago.

The regular trading session saw a 1.6% rise in Coca-Cola after the company gave its full-year revenue forecast a boost.

A 2.7% rise was also seen in McDonald’s Corp after it managed to beat expectations. Industrial gas giant 3M Co also recorded a rise of 4.9%, upon announcing spinning off its healthcare unit.

A 4.6% gain was recorded in General Electric Co after profit and revenue estimates of the conglomerate turned out better than expectations.

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