U.S. stocks slipped Wednesday afternoon following a poorly-received Target earnings report and as strong October retail sales revived concerns about the Federal Reserve’s likely pace of interest rate hikes.
How are stocks trading
- S&P 500 SPX, -0.72% falls 29 points, or 0.7%, to 3,963.
- Dow Jones Industrial Average DJIA, -0.04% was flat at 33,594.
- Nasdaq Composite COMP, -10.09% fell 160 points, or 1.4%, to 11,198.
On Tuesday, the Dow Jones Industrial Average rose 56 points, or 0.17%, to 33593, the S&P 500 increased 34 points, or 0.87%, to 3992, and the Nasdaq Composite gained 162 points, or 1.45%, to 11358.
What’s driving markets
The S&P 500 was trading near the session’s lows in afternoon action, after U.S. retail sales jumped 1.3% in October, suggesting U.S. consumers are still spending a lot of money despite the Federal Reserve’s efforts to slow the economy.
Stocks also weakened after retailer Target Inc. TGT, -13.32% delivered a poorly-received earnings report, which sent its shares tumbling and weighed on other big-box retailers like Best Buy Co. BBY, -8.45% Investors were taken aback particularly because Walmart Inc.’s WMT, +0.70% earnings a day earlier painted a much more robust picture of the state of the U.S. consumer.
“Target’s signal that a consumer spending recession was unfolding heading into the all-important holiday shopping season came as a shock to some investors after yesterday Walmart reassured trends were ok,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab.
U.S. stocks have been up six of the previous eight trading days, bolstered by last week’s softer-than-expected October consumer prices report and Tuesday’s weaker-than-forecast producer-price data, both of which raised hopes that the Federal Reserve might be less aggressive about raising interest rates than previously feared.
Katie Stockton, a market analyst at Fairlead Strategies, said stocks were ripe for a brief pullback, although technical factors suggest the major U.S. indexes will resume their uptrend as the holiday season in the U.S. gets underway.
Others on Wall Street worry investors have once again gotten too optimistic about hopes an eventual pause of Fed interest rate hikes, and also potentially worrying too little about U.S. recession risks.
In the Treasury market, the 10-year note yield was off 10 basis points at 3.7%, while the 2-year Treasury yield TMUBMUSD02Y, 4.352%, which is particularly sensitive to monetary policy, was up marginally at 4.36%.
Several senior Fed officials also spoke on Wednesday, including San Francisco Federal Reserve President Mary Daly who said that the central bank’s benchmark interest rate may have to rise above 5% to start to put downward pressure on inflation, with somewhere between 4.75% and 5.25% looking like a reasonable range. Fed Governor Christopher Waller later in the session that recent economic data should allow the central bank to consider dialing back the pace of its interest rate hikes at its next meeting in December.
In other economic data, October industrial production shrank 0.1% according to data released by the Federal Reserve, disappointing hopes for a 0.1% gain, according to a survey by The Wall Street Journal. The National Association of Home Builders’ monthly confidence index fell 5 points to 33 in November, the trade group said on Wednesday.
Geopolitical issues remained a worry Wednesday, with European indexes closing lower after a missile that cross into Poland on Tuesday sparked concerns of a potential escalation of Moscow’s war in Ukraine. The STOXX Europe 600 SXXP, -0.98% finished down 1%. Washington said the missile was an errant Ukrainian attempt to destroy incoming Russian projectiles.
Companies in focus
- Tesla Inc. TSLA, -3.80% shares were off 3.8% Wednesday as CEO Elon Musk testified to defend himself in a shareholder lawsuit that could challenge his compensation package, pegged as potentially worth $55 billion, according to the AP.
- Carnival Corp. CCL, -14.12% was off sharply after announcing plans to issue more debt.
- Lowe’s Inc. LOW, +2.96%, the home improvement retailer, reported third-quarter earnings on Wednesday that beat analysts’ expectations, with revenue up compared to the same period last year.
- Shares of Advance Auto Parts Inc. AAP, -15.33% plunged after the specialty retailer missed Wall Street expectations for its quarterly earnings as it sold more of its cheaper in-house brands than national brands.
—Frances Yue and Jamie Chisholm contributed reporting
