Wall Street Ends Significantly Lower As Target And Growth Stocks Drop

Wall Street ended substantially lower on Wednesday, with Target losing almost a quarter of its stock market value and reflecting worries about the U.S. economy as the retailer became the latest victim of surging prices.

It was the largest one-day loss for the S&P 500 and Dow Jones Industrial Average since June 2020.

Target Corp (NYSE:TGTfirst-quarter )'s profit fell by half and the firm warned of a greater margin hit on rising gasoline and freight expenses. Its shares plunged approximately 25 percent , shedding about $25 billion in market capitalization, in their worst session since the Black Monday meltdown on Oct. 19, 1987.

The retailer's results came a day after rival Walmart (NYSE:WMT) Inc cut its earnings projection. The SPDR S&P Retail (NYSE:XRT) ETF lost 8.3 percent.

"We think the emerging impact on retail spending as inflation outpaces salaries for even longer than many might have thought is a major element in creating the market sell-off today," said Paul Christopher, head of global market strategy at Wells Fargo (NYSE:WFC) Investment Institute. "Retailers are starting to expose the impact of decreasing customer purchasing power."

Interest-rate sensitive megacap growth firms added to previous drops and dragged the S&P 500 and Nasdaq down. Amazon (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA) Inc lost close to 7 percent , while Apple (NASDAQ:AAPL) fell 5.6 percent .

"The downsides outweigh the pros for growth stocks at this current moment, and the market is trying to evaluate how bad it's going to go," said Liz Young, head of investment strategy at SoFi. "The market is terrified of the next six months. We may find out that it doesn't need to be as frightening as this, and markets do tend to overreact on the negative."

All of the 11 S&P 500 sector indexes dropped, with consumer discretionary and consumer staples leading the way below, both down more than 6 percent .

Rising prices, the crisis in Ukraine, lengthy supply chain snarls, pandemic-related lockdowns in China and monetary policy tightening by central banks have dragged on financial markets recently, fanning concerns about a worldwide economic slowdown.

Wells Fargo Investment Institute on Wednesday said it predicts a slight U.S. recession by the end of 2022 and early 2023.

Federal Reserve Chair Jerome Powell said on Tuesday that the U.S central bank will hike rates as high as needed to halt a surge in inflation that he warned threatened the foundation of the economy.

Traders are pricing in 50-basis point interest rate hikes by the Fed in June and July.

Unofficially, the S&P 500 fell 4.04 percent to conclude the day at 3,923.68 points.

The Nasdaq lost 4.73 percent to 11,418.15 points, while Dow Jones Industrial Average declined 3.57 percent to 31,490.07 points.

The S&P 500 is down around 18 percent so far in 2022 and the Nasdaq has down about 27 percent , hammered by collapsing growth firms. Almost two-thirds of S&P 500 stocks are down 20 percent or more from their 52-week highs, according to Refinitiv data.

Refinitiv data indicates that the recent sell-off on Wall Street has left the S&P 500 trading at about 17 times projected profits, its lowest PE valuation since the 2020 sell-off sparked by the coronavirus pandemic.

The CBOE volatility index, widely known as Wall Street's fear barometer, increased to 31 points following six consecutive sessions of decline.

Volume on U.S. exchanges was 12.5 billion shares, compared to the 20-day average of 13.4 billion shares.

On the NYSE, declining issues outnumbered rising ones by a ratio of 5.09 to 1; on the Nasdaq, the ratio was 3.52 to 1.

The S&P 500 recorded one new 52-week high and 37 new lows, but the Nasdaq Composite recorded 25 new 52-week highs and 242 new lows.