Wall Street falls as Walmart warning shakes retail sector

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 21, 2022. REUTERS/Brendan McDermid

Walmart Cuts Profit Forecast, Drags Retailers
McDonald’s rises as sales, profits top estimates
GE Raises Profits, Coca-Cola Raises Hike Forecast
Indexes down: Dow 0.56%, S&P 1.17%, Nasdaq 1.83%

July 26 (Reuters) – U.S. stock indexes fell on Tuesday after Walmart’s profit warning raised fears in the retail sector that consumers are cutting discretionary spending in the face of decades-high inflation.

Walmart Inc ( WMT.N ) shares fell 7.7%, while Target Corp ( TGT.N ) and Amazon.com Inc ( AMZN.O ) each fell more than 4%, with the online retail giant that weighed the most on the Nasdaq. index (.IXIC). Read more

In a sign of increasing pressure to shore up profits amid higher costs, Amazon said it would raise fees for its Prime delivery and streaming service in Europe by up to 43% annually. Read more

The S&P 500 Consumer Discretionary Index (.SPLRCD) fell 3.2%, leading sector decliners. The S&P 500 retail index (.SPXRT) fell 3.9%.

“There is a general expectation that Walmart’s problems are symptomatic of the entire retail space,” said Chuck Lieberman, chief investment officer at Advisor Capital Management.

“Certainly, inflation is higher than people are comfortable with, and that’s likely to remain so for some time.”

Along with high inflation, a stronger dollar is also expected to hurt profits for companies with expanding global operations.

Wall Street’s major indexes have rallied from mid-June lows as lower commodity prices and weak economic data led investors to reduce expectations for aggressive rate hikes by the U.S. Federal Reserve, but fears of a recession have undermined momentum recently.

The Fed is expected to offer an interest rate hike of 75 basis points at the end of its two-day policy meeting on Wednesday, which would be followed by comments from Chairman Jerome Powell.

US consumer confidence fell to a near 1½-year low in July, data showed, pointing to slower economic growth at the start of the third quarter. Read more

Thursday’s advance second-quarter GDP data is likely to be negative after the US economy contracted in the first three months of the year.

The International Monetary Fund, for its part, has once again cut global growth forecasts, warning of the risks of high inflation and the war in Ukraine. Read more

At 12:19 pm ET, the Dow Jones Industrial Average (.DJI) was down 178.18 points, or 0.56%, at 31,811.86, the S&P 500 (.SPX) was down 46.24 points, or a 1.17%, to 3,920.60 and the Nasda (. .IXIC) dropped 215.17 points, 1.83%, to 11,567.50.

Among Dow components, Coca-Cola Co ( KO.N ) gained 1.6 percent after the company raised its full-year revenue forecast, while McDonald’s Corp ( MCD.N rose 2.6% after beating quarterly expectations. Read more

3M Co ( MMM.N ) rose 6.4 percent after the industrial giant said it planned to spin off its healthcare business. Read more

General Electric Co ( GE.N ) gained 6.6 percent after the U.S. industrial conglomerate beat estimates on revenue and profit, while General Motors Co ( GM.N ) fell 3.3 percent after to register a 40% drop in quarterly net profits. Read more

Apple Inc ( AAPL.O ), Netflix Inc ( NFLX.O ), Tesla Inc ( TSLA.O ) each fell about 1.5%, while Alphabet Inc ( GOOGL.O ) and Microsoft Corp ( MSFT .O) fell about 2.5% and 3.2%, respectively, ahead of their quarterly reports after the market closed.

Earnings at S&P 500 companies are expected to have risen 6.2% in the second quarter from the year-ago period, according to data from Refinitiv.

Declining issues outnumbered advancing ones by a ratio of 1.94 to 1 on the NYSE and by a ratio of 1.82 to 1 on the Nasdaq.

The S&P index hit a new 52-week high and 30 new lows, while the Nasdaq hit 28 new highs and 103 new lows.

Reporting by Shreyashi Sanyal and Aniruddha Ghosh in Bangalore; Editing by Arun Koyyur and Anil D’Silva

Our standards: the Thomson Reuters Trust Principles.

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