U.S. stocks posted the biggest daily drop in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The dollar and Treasuries gained amid a pickup in haven bids.
The selloff sent the S&P 500 down 4%, with the plunge in consumer shares surpassing 6%.
Target Corp. tumbled more than 20% in its worst rout since 1987, after trimming its profit forecast due to a surge in costs. Shares of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft.
The Nasdaq 100 fell the most among major benchmarks, dropping more than 5% as growth-related tech stocks sank. Megacaps Apple Inc. and Amazon.com Inc. slid at least 5%.
Treasuries rose across the board, sending the 10- and 30-year Treasury yields down as much as 11 basis points. The dollar rose against all of its Group-of-10 counterparts, except the yen and Swiss franc. Gold caught bids in the move into havens.
The benchmark S&P 500 is emerging from the longest weekly slump since 2011, but any rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s Covid lockdowns.
In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat.
Chicago Fed President Charles Evans said Wednesday he sees a half-point rate increase at next month’s meeting and “probably thereafter.”
“Stocks are getting hammered as inflation fears and weak earnings hit market sentiment hard,” Fiona Cincotta at City Index said in an email. “While strong retail sales helped boost stocks yesterday, disappointing quarterly numbers from retail giants Target and Lowe’s are striking fear into the market today. The data yesterday suggests that consumers are weathering the inflation hit for now. Retailers, however, are not doing so well at navigating through soaring input costs.”
“Worries over inflation and a hawkish Fed are nothing new, but now add in worries over profit margins and the impact of inflation on the consumer and you have the recipe for a big down day,” Ryan Detrick, chief market strategist at LPL Financial, said in a note.