On Tuesday, Wall Street ignored a weak earnings report from Walmart and focused on solid retail sales data for April, sending the wider market higher and taking others, including Australia, with it. Walmart shares lost more than 11% on the day, the largest single day fall since 1987 but investors ignored the sell off and the reasons for it – crimped margins because of inflation and supply chain problems that just won’t go away.
Wednesday was a different story entirely. Wall Street noticed a weak earnings report from Target, a key Walmart rival, and down went the market. The Dow was off 1,164 points, falling to a 14-month low. It is now off 13.3% year to date.
The S&P 500 lost more than 4% by the close. The benchmark index is now down 17.68% from the record high it reached at the beginning of the year. The Nasdaq ended 4.73%, or 566 points lower, and is now down 27% year to date.
Target shares fell 21% in pre-market and that followed over into the regular session as the shares ended down more than 25%, knocking more than $US25 billion off the value of the retailer. On top of Tuesday’s 11% plus slide, Walmart shares lost another 6.8%.
The Australian sharemarket is set for heavy losses, with futures at 7.00am Sydney time pointing to a fall of 126 points, or more than 1.5%, at the open.
Target reported a 3.3% rise in comparable store sales, a small rise in revenue to $US25.17 billion but a 48% drop in earnings for the quarter as profit margins were crunched.
Net income for the quarter was $1.01 billion against $US2.1 billion for the first quarter of 2021 when sales soared more than 20% as investors spent their way out of the first found of lockdowns.
The 3.3% rise in same store sales was a lot better than the market’s 0.8% rise forecast.
But that was not enough as the retailer blamed higher freight costs, higher markdowns and lower-than-expected sales of discretionary items from TVs to bicycles to fashionwear.
The casualties were extensive – Twitter fell more than 3.8% to $US36.85, $US17.35 under Elon Musk’s $US54.20 offer. The putative bid will not happen.
Tesla shares fell 6.8% to just over $US709, the lowest the shares have been since last August.
Amazon shares fell more than 7%. Other retail stocks fell heavily.
Best Buy’s shares dropped fell 10.5%. Dollar General’s fell 11.1%, and Dollar Tree’s lost 14.4%. Shares of Macy’s dropped 10.7%, while shares of Kohl’s fell 11%.
Hardware chain, Lowe’s fell 5.3% after it missed forecasts and saw sales weaken.
Apple shares shed 5.6% and Alphabet shares lost 3.9%. Meta Platforms (the old Facebook) fell 5.1%.
Not even the halo of Warren Buffett could sustain Citigroup shares – they fell more than 3.4% after Tuesday’s 7% rise off the back of news that Berkshire Hathaway had taken a big stake in the bank.
