Stocks slide as retail sales hit, missing target profits

US stocks fell Wednesday morning as Wall Street weighed in Profit warning from retail pioneer Target against government retail sales, which showed robust consumer spending ahead of the important holiday season.

The S&P 500 (^GSPC) fell 0.4% while the Dow Jones Industrial Average (^ DJI) floated below the flatline. The technology-chasing Nasdaq Composite (^IXIC) fell 0.8%.

This was announced by the Department of Commerce on Wednesday Retail sales rose 1.3% in October as Americans spent on groceries, gasoline and expensive items last month despite inflationary pressures. Economists polled by Bloomberg were expecting an overall increase of 1.0% after activity had stagnated the previous month.

A strong pressure can derail the uptrend of the marketwith investors likely to interpret robust spending as a sign for Federal Reserve policymakers that aggressive rate hikes can continue.

All eyes were on the target (TGT) when it plunged 15% after a third-quarter earnings report that fell by a wide margin and a weak guidance for the holiday quarter. The retailer has been pressured by a slowdown in consumer spending on consumer goods and said store looting reduced its gross profit margin by $400 million so far this year.

“In the final weeks of the quarter, revenue and earnings trends weakened significantly, with guest shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty,” said Brian Cornell, Target chairman and CEO, in the earnings release in the third quarter, which is well below our expectations.”

Elsewhere in the market, the US dollar lost ground, while oil edged higher as geopolitical jitters eased A Russian-made missile has hit Poland Tuesday and reignited fears of an escalation in Russia’s war in Ukraine. President Joe Biden met with NATO allies at the G20 meeting in Bali, Indonesia on Wednesday alleviated concerns about enforcement US officials will assist Poland in investigating whether the missile was launched by Russia.

Back domestically, shares have held up so far this week after a lighter CPI reading on Thursday sparked an outsized recovery rally. The October Producer Price Index (PPI), another key indicator of inflation, reignited that optimism in Tuesday’s meeting, along with comments from Federal Reserve members over the past few days that hinted at a possible slowdown in rate hikes.

“We should all keep in mind that Fedspeak is quite diverse at the moment, and depending on which official you ask you can get a hawkish view or a dovish view,” Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office, said in one Note. “The market is also digesting how much inflation is affecting the consumer, with key retail earnings beating expectations and retail sales coming.”

WASHINGTON, DC - MAY 23: (LR) Vice Chairman of the Federal Reserve Lael Brainard shakes hands with Jerome Powell after taking the oath of office for his second term as Chairman of the Board of Governors of the Federal Reserve System at the William McChesney Martin Jr. building of the Federal Reserve May 23, 2022 in Washington, DC.  Powell has served as Chairman of the Federal Reserve Board of Governors since February 2018.  (Photo by Drew Angerer/Getty Images)

WASHINGTON, DC – MAY 23: (LR) Vice Chairman of the Federal Reserve Lael Brainard shakes hands with Jerome Powell on May 23, 2022 in Washington, DC. (Photo by Drew Angerer/Getty Images)

On the earnings front, retail earnings other than Target’s have beaten analyst estimates so far.

Hardware store Lowe’s (LOW) Exceed analyst forecasts Wednesday. Shares were up 3% on open even though the company trimmed the top end of its full-year revenue guidance.

Megastore Walmart (WMT) benefited from More valuable customer spending inflation and a “significant” improvement in inventories, while higher prices helped offset fewer transactions at Home Depot (HD). And TJ Maxx’s parent company, TJX Companies (TJX) raised its sales forecast after reporting strong demand in the third quarter.

Another round of industry peers are still on deck to report, with findings from Victoria’s Secret (VSCO) probably on Wednesday. Nvidia (NVDA) is another major headliner on the winning list.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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