Shares of retailers from Walmart Inc to Macy’s Inc were caught in the downdraft.
U.S. stocks posted the biggest daily decline in nearly two years as investors weighed the impact of rising prices on earnings and the prospect of tighter monetary policy on economic growth. The dollar and Treasuries gained amid a rally in safe-haven bids.
The sell-off sent the S&P 500 tumbling 4%, with the fall in consumer stocks exceeding 6%. Target Corp. fell more than 20% in its worst rout since 1987, after it cut its profit forecast due to soaring costs. Stocks of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft. The Nasdaq 100 fell the most among major benchmarks, falling more than 5% as growth-linked tech stocks fell. Apple Inc. and Amazon.com Inc. megacaps lost at least 5%.
Treasuries rose across the board, pushing 10- and 30-year Treasury yields down as much as 11 basis points. The dollar appreciated against all of its Group of 10 peers except the yen and the Swiss franc. Gold caught the offers moving towards safe havens.
The benchmark S&P 500 index emerges from the longest weekly decline since 2011, but any rebound in risk sentiment is proving fragile amid tightening monetary parameters, Russia’s war in Ukraine and Covid lockdowns in China.
In some of his most hawkish remarks to date, Federal Reserve Chairman Jerome Powell said on Tuesday that the US central bank would raise interest rates until there was “clear and convincing” that inflation is falling. Chicago Fed President Charles Evans said Wednesday he expects a half-point rate hike at next month’s meeting and “probably thereafter.”
In Europe, new vehicle sales fell for a 10th consecutive month as the industry remains mired in supply chain crises, while inflation in the euro zone plateaued at a record high. Meanwhile UK inflation has risen to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for government and central bank action.
Elsewhere, the Biden administration is set to completely block Russia’s ability to pay U.S. bondholders after a deadline expires next week, a move that could bring Moscow one step closer to default. Sri Lanka, meanwhile, is set to forgo $12.6 billion in foreign bonds, a warning sign to investors in other developing countries that soaring inflation is set to have consequences. painful consequences.
What damage will be done to the US economy and global markets before the Fed changes tack and eases policy again? The “Fed Put” is the theme of this week’s MLIV Pulse survey.
Some of the major movements in the markets:
- The S&P 500 fell 4% at 4 p.m. PT
- The Nasdaq 100 fell 5.1%
- The Dow Jones Industrial Average fell 3.6%
- The MSCI World index fell 2.7%
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.8% to $1.0465
- The British pound fell 1.2% to $1.2341
- The Japanese yen rose 0.9% to 128.27 per dollar
- The yield on 10-year Treasury bills fell nine basis points to 2.89%
- Germany’s 10-year yield fell two basis points to 1.03%
- The UK 10-year yield fell two basis points to 1.86%
- West Texas Intermediate crude fell 2.7% to $109.31 a barrel
- Gold futures fell 0.2% to $1,815 an ounce
- (An earlier version of this story corrected the spelling of Walmart.)
–With help from Michael Msika, Andreea Papuc, Robert Brand and Isabelle Lee.