DJIA: 31,490.07, down 1,164.52
S&P 500: 3,923.68, down 165.17
Nasdaq: 11,418.16, down 566.36

Stocks see worst day in nearly two years

U.S. stocks finished firmly lower on Wednesday, relinquishing gains seen in recent sessions as corporate earnings from key retailers highlighted the persistence of inflationary pressures. Target Corp. slumped 25.5%– its worst session since 1987– after its profit tally disappointed consensus estimates as the company coped with higher costs. The results mirrored those of competitor Walmart Inc.’s yesterday, with the big-box retailer slashing its full-year outlook as higher food prices especially squeezed its margins. Both the Dow and S&P 500 suffered their steepest percentage declines since June 2020, sliding 3.6% (or 1,164 points) and 4%, respectively. The latter narrowly avoided bear market territory (defined as a 20% drawdown from a recent peak). The Nasdaq Composite tumbled 4.7%, now 28.9% below its November 19 record.

All 11 S&P 500 sectors closed in negative territory, with the Consumer Staples and Consumer Discretionary groups shedding the most. TJX Companies Inc. bucked the downtrend, rallying 6.5% as its solid margin performance and earnings guidance overshadowed softer-than-expected sales.

Perceived safe haven assets caught a bid amid the decidedly risk off tone. A gauge of the U.S. dollar gained 0.5%, while Treasuries recouped some of yesterday’s losses. The yield on the 10-year note fell 10 basis points (0.10%) to 2.88%. Shorter-dated yields remained elevated after Federal Reserve Chair Jerome Powell yesterday stated that the central bank “won’t hesitate” to tighten policy into restrictive territory, if necessary, in order to tame inflation. On the data front, housing starts slipped a smaller-than-projected 0.2% in April, while building permits shrank 3.2% during the same period. Separately, mortgage applications fell 11% in the latest week.

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