The stock markets were a sea of red on Wednesday, as the financial results of large retailers showed that it was difficult for them to cope with persistently high inflation.
The S&P 500 fell more than four percent, its worst one-day show since June 2020, as investors reacted to alarming signs that consumers were slowing their spending at high prices.
Shares in Target fell more than 25% after the retailer said its profits had been halved due to higher costs and supply chain problems. It was the worst day for Target shares on Black Monday in 1987, and it came a day after rival Walmart painted a similar picture the day before.
Shares of Walmart fell more than 11% on Tuesday and another 7% on Wednesday after the retailer warned of lower profits due to higher transportation and wage costs, as well as supply chain problems. Tuesday’s sell-off was also the biggest one-day drop in Walmart shares since 1987.
This gloom, coming from two cost-conscious retailers, has sparked investors’ fears that if they have trouble targeting high inflation, many others should too.
“Consumer strength will be tested as both Walmart and Target signal that rising price pressures are not easing,” said analyst Edward Moya of Oanda.
The Dow Jones Industrial Average lost nearly 1,200 points or more than three percent, and the technology-focused Nasdaq lost more than 500 points or more than four percent.
Since the beginning of the year, the Dow has been down 14%, the S&P 18% and the Nasdaq 28%, according to Bloomberg.
“Shares are falling apart after Wall Street worries about economic growth after hearing a number of fears of higher prices that will not weaken any time soon,” Moya said.
Statistics from Canada said on Wednesday that inflation in the country rose again last month to a new 31-year high of 6.8 percent.
Although the Toronto Stock Exchange performed better than its US counterparts, it was not immune to the sell-off, losing 389 points, or about two percent, to close just over 20,100 points at the end of the trading day. The base Canadian index has lost about seven percent of its value since the beginning of the year and was more than 22,000 points earlier this month.
“The day is really difficult for the stock markets,” said Colin Chesinski, chief market strategist at SIA Wealth Management, in an interview with CBC News.
“In particular, retailers are beginning to squeeze between rising costs and easing demand,” he said. “We’ve just seen a rush for stock market exits today.”
The technical actions hit hard
Shares of technology, which rose earlier in the pandemic as the world became increasingly digital and online due to the blocking of COVID-19, continue to hit.
Shares of Apple lost six percent to trading at their lowest level since October. Amazon shares lost seven percent and shares are now trading where they were in April 2020. Netflix lost another seven percent and is now trading at its lowest level since 2018.
Canadian technology companies have also sold out, with shares in e-commerce company Shopify, payment processing company Lightspeed and BlackBerry down about three percent.
Cieszynski said the sale of technology stocks makes sense because the sector “benefits … when investors feel confident and when investors are willing to take risks”.
“At a time when investors are shrinking, avoiding risk and becoming more protective, [technology] it tends to perform less well, “he said.
Bitcoin falls below $ 30,000
Bitcoin was no exception, as the world’s largest cryptocurrency continued to collapse, losing another five percent to trade below $ 30,000 for the first time since 2021.
“The speculative excesses of cryptocurrency in 2021 could mark a similar fate for risky assets as the bursting of the Internet bubble in 2000,” said Bloomberg Intelligence analyst Mike McGlone.
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