Stock Market Today (5/18/22): Dow Sinks 1,164 Points in Worst Day Since June 2020 – Kiplinger’s Personal Finance

Retail earnings week took a big turn for the worse Wednesday.

A day after Walmart (WMT, -6.8%) sounded the alarm with a mixed quarterly report that suggested inflation was taking a toll on American consumers, Target (TGT, -24.9%) confirmed those concerns with an equally problematic set of results. That in turn sparked a deep blood-letting across most consumer stocks and sent the Dow to its worst single-day decline since June 2020.

As we detailed in today’s free A Step Ahead newsletter, Target topped Wall Street’s expectations for quarterly revenues, but it missed profit estimates by a country mile and issued a disappointing full-year operating profit. While consumer spending remained strong, it shifted from more discretionary purchases to staples such as groceries, plus spending on items such as luggage hinted that consumers are preparing to shift their dollars toward experiences rather than goods. Meanwhile, TGT projected it could need to absorb roughly $1 billion in other inflation-related costs, such as higher fuel and diesel prices.

“The Charlie Brown shirt market continues, with big moves up and down seemingly every day,” says Ryan Detrick, chief market strategist for LPL Financial. “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.”

A big down day indeed. 

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Consumer-oriented sectors took Target’s news the worst. Consumer discretionaries (-6.6%) led the market lower, but typically defensive consumer staples (-6.4%) weren’t much better, with other stores such as Dollar General (DG, -11.1%) and Costco (COST, -12.5%) swooning in sympathy with TGT.

As far as the broader indexes were concerned? The Dow Jones Industrial Average plunged 3.6% to 31,490 – its worst single-session loss since a 6.9% decline on June 11, 2020. The S&P 500 Index was even worse, off 4% to 3,923 as all 11 of its sectors closed in the red. And the Nasdaq Composite suffered a 4.7% drop to 11,418.

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