Wall Street ends after Target outlook, Micron supply cut

  • Retail sales in October rise more than expected
  • Target’s bleak prospects are weighing on retailers
  • Micron’s supply cut triggers chip sell-off
  • Indices down: Dow 0.12%, S&P 0.83%, Nasdaq 1.54%

November 16 (Reuters) – Wall Street’s main indices closed lower on Wednesday as a gloomy outlook from Target sparked fresh concerns for retailers heading into the crucial holiday season, while semiconductor stocks slid after Micron’s supply cut.

Target Corp stock (TGT.N) fell 13.1% after the major retailer forecast a surprise fall in holiday quarter sales.

Retail stocks slumped across the board, including falls of over 8% in Macy’s Inc (MN) and BestBuy Co Inc (BBY.N) and a 7% decline for Foot Locker (FL.N). The consumer discretionary sector in the S&P 500 (.SPLRCD) 1.5% lost.

Micron technology (MU.O) Shares fell 6.7% after the company said it would reduce supply of memory chips and further cut its investment plan. The information technology sector of the S&P 500 (.SPLRCT) fell 1.4% and the Philadelphia SE Semiconductor Index (.SOX) fell by 4.3%.

“The biggest industry issue is Target’s earnings and what that means for retail and consumer spending in general. I think that 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 gains off the table because it still looks like the fundamentals in tech are still not great,” Carlson said.

The Dow Jones Industrial Average (.DJI) fell 39.09 points, or 0.12%, to 33,553.83, the S&P 500 (.SPX) lost 32.94 points, or 0.83%, to 3,958.79 and the Nasdaq Composite (.IXIC) fell 174.75 points, or 1.54%, to 11,183.66.

Win in defensive areas like utilities (.SPLRCU) and consumer goods (.SPLRCS) helped mitigate S&P 500 losses. Utilities gained 0.9% while staples rose 0.5%.

Despite Target’s sell warning, data showed that US retail sales rose more-than-expected in October as households increased auto purchases, suggesting consumer spending picked up early in the fourth quarter.

Elsewhere in retail, shares of Lowe’s (LOW.N) rose 3% after the home improvement company raised its annual earnings guidance.

Stocks rallied sharply over the past month after weaker-than-expected inflation data raised hopes that the US Federal Reserve might be less aggressive in raising interest rates.

“The market had bounced off these lows and continued to move higher,” said George Catrambone, Head of Americas Trading at DWS Group. “The market has a lot to think about and digest as we head into the end of the year.”

Fed Governor Christopher Waller, an early and outspoken inflation hawk, said he was now “more comfortable” with smaller rate hikes in the future after data showed that rate hikes were slowing.

Investors also watched geopolitical tensions. A missile that hit Poland was likely a stray fired by Ukraine’s air defenses and not a Russian attack, Poland and NATO said, assuaging global concerns that the war in Ukraine could spread beyond the border.

Declining issues predominated 1.96 to 1 on the NYSE; on the Nasdaq, a 2.23 to 1 ratio favored decliners.

The S&P 500 posted 3 new 52-week highs and 2 new lows; the Nasdaq Composite posted 71 new highs and 133 new lows.

About 10.5 billion shares changed hands on US exchanges, compared to the daily average of 12.2 billion over the past 20 sessions.

Reporting by Lewis Krauskopf in New York, Bansari Mayur Kamdar, Ankika Biswas and Amruta Khandekar in Bengaluru; Edited by Shounak Dasgupta, Arun Koyyur and David Gregorio

Our standards: The Thomson Reuters Trust Principles.

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