The Dow Jones Industrial Average posted its biggest loss since 2020 on Wednesday after another major retailer warned of rising cost pressures, confirming investors’ worst fears over rising inflation and rekindling the brutal 2022 sell-off. The Dow shed 1,164.52 points, or 3.57%, to 31,490.07, the average’s biggest decline since June 2020. It was the lowest close for the Dow since March 2021.
According to CNBC News, The S&P 500 traded 4.04% lower to 3,923.68, also the worst drop since June 2020. The Nasdaq Composite slipped 4.73% to 11,418.15, which is the largest fall in the tech-heavy index since May 5. The selling was broad and intense on Wall Street with just eight members of the S&P 500 in the green.
Markets returned to heavy selling after two back-to-back quarterly reports from Target and Walmart stoked investor fears of rising inflation taking a bite out of corporate profits and consumer demand. It’s the fifth Dow decline of more than 800 points this year, which all occurred as the stock sell-off intensified within the last one month.
The weak reports stoked concerns that red-hot inflation is squeezing a wide range of businesses and could cut deeper into their profits. They also coincide with an increasingly hawkish posture from the Federal Reserve, with chairman Jerome Powell saying on Tuesday that the bank could consider “moving more aggressively” to raise rates if inflation doesn’t fall quickly.
“Chairman Powell’s hawkish comments yesterday afternoon and Target’s shrinking profit margins this morning were too much for the market to handle,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said in a note.
“We’ve been expecting volatility all year long and unfortunately we’ve gotten it, but the market needs to price in a more-hawkish-than-many-expected Fed, inflation that is more persistent than previously believed, and an economy that is slowing down due to rising rates and decreasing consumer demand,” he said.
