The bone US stock indexes fell on Tuesday after the reduction in earnings forecasts of walmart will increase fears in the retail sector that consumers reduce discretionary spending highest inflation in decades.
According to preliminary data, the S&P500 lost 46.31 points, or 1.17%, to finish at 3,920.53 units, while the Nasdaq it lost 220.09 points, or 1.88%, to settle at 11,562.58. Industry average Dow Jones it fell 235.98 points, or 0.74%, to 31,754.06 units.
walmart, the largest supermarket chain in the United States, lowered its profit forecast for the current quarter and its full year on Monday due to the effect of the inflation in consumer spending.
In a note, the company warned that “food inflation is in double digits” and that “This affects customers’ ability to spend across general product categories and requires more markdowns to move inventory, especially on apparel.”
“That’s what happens when inflation is this high or when consumers are struggling to pay their bills,” said Eugenio J. Aleman, chief economist at Raymond James. “People are starting to be very picky about consumption, so they’re basically cutting back on discretionary purchases in favor of their necessities.”
Along with high inflation, a stronger dollar affect the profits of companies with global operations.
Investors remain very concerned about the impact of inflation in corporate profits and how that will affect American consumers. Although American finances are relatively strong thanks to the savings accumulated during the pandemic, these savings are spent on high gas and food prices.
U.S. consumer confidence fell for the third month in a row in July, amid continued concerns about the acceleration of the inflation and the rise of interest rateindicating weaker economic growth at the start of the third quarter.
Major indexes posted strong gains last week, supported by mostly better-than-expected corporate earnings reports. Falling yields in the bond market also helped, easing pressure on equities after expectations of rate hikes by the Federal Reserve pushed yields higher for much of this year.
The central bank is expected to announce a rate hike of up to three-quarters of a percentage point on Wednesday, triple the usual rate. The central bank is waging an aggressive campaign to rein in inflation, which has been high for four decades. The expected hike would put the Fed’s benchmark rate in a range of 2.25% to 2.5%, the highest since 2018.
Bond yields were mixed on Tuesday. The two-year Treasury yield, which tends to move with Fed expectations, rose to 3.04% from 3.02% late Monday. The 10-year yield, which influences mortgage rates, fell from 2.82% to 2.79%.
Investors were waiting for the latest reports from business results. Tech heavyweights Alphabet and Microsoft report results after the closing bell, while Meta, Apple and Amazon report later in the week.
(With information from Reuters and AP)