NEW YORK: US stocks closed lower on Wednesday (Nov 16) as markets grappled with a mixed picture involving resilient retail sales but a gloomier outlook for the holiday season.
The Dow Jones Industrial Average fell 39.09 points, or 0.12%, to 33,553.83, the S&P 500 lost 32.94 points, or 0.83%, to 3,958.79 and the Nasdaq Composite dropped 174.75 points, or 1.54%, to 11,183.66.
The slump came after major US retailer Target reported weaker-than-expected third quarter profits, citing an “increasingly challenging environment” as American households were squeezed by soaring inflation.
Target shares plunged 13.1% after it warned of a softer holiday season, which weighed on other merchants as well.
“The focus is on retail earnings and more importantly on the strength of the consumer going forward,” said Adam Sarhan of 50 Park Investments.
US retail sales data on Wednesday suggested resilience in consumer spending despite price pressures, but there was a slight dip in discretionary segments such as electronics and appliance stores.
But Sarhan said “Investors care about the future. They want to see if the consumer is able to continue to consume in the face of high inflation and higher interest rates.”
Retail stocks slumped broadly, including declines of over 8% in shares of Macy's Inc and Best Buy Co Inc and a 7% drop for Foot Locker. The S&P 500 consumer discretionary sector shed 1.5%.
Micron Technology shares dropped 6.7% after the company said it would reduce memory chip supply and make more cuts to its capital spending plan. The S&P 500 information technology sector fell 1.4% and the Philadelphia SE Semiconductor index sank 4.3%.
“The biggest sector issue is Target’s earnings and what that means for retail and consumer spending in general. I think that has kind of set the tone for the market,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
The Micron news “is certainly causing some tech investors to take some of these short term profits off the table because it still appears like the fundamentals are still not great in the tech space”, he said.
Elsewhere in retail, shares of Lowe's rose 3% after the home improvement company raised its annual profit forecast.
Meanwhile, Federal Reserve governor Christopher Waller said he was “comfortable” considering a slower pace of interest rate increases given recent signs of easing inflation and a slowing economy, although more increases are still needed.
But even with a smaller, half-point step at the Fed’s December policy meeting – following four straight three-quarter point increases – he cautioned that “this would still be a very significant tightening action”. – AFP, Reuters
Source: The Sun Daily
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