Wall Street falls as Walmart warning rattles 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

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

Shares of Walmart Inc (WMT.N) slumped 7.7%, while those of Target Corp (TGT.N) and Amazon.com Inc (AMZN.O) fell over 4% each, with the online retail giant weighing the most on the Nasdaq index (.IXIC). read more

In a sign of rising pressure to shore up profit amid higher costs, Amazon said it would raise fees for delivery and streaming service Prime in Europe by up to 43% a year. read more

The S&P 500 consumer discretionary index (.SPLRCD) slid 3.2%, leading sectoral declines. The S&P 500 retailing index (.SPXRT) dropped 3.9%.

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

“No doubt inflation is higher than people are comfortable with, and that’s probably going to remain the case for a while.”

Along with high inflation, a stronger dollar is also expected to weigh on profits of companies with sprawling global operations.

Wall Street’s main indexes have rallied from mid-June lows as softening commodity prices and downbeat economic data prompt investors to scale back expectations of aggressive rate hikes by the Federal Reserve, but fears of a recession have sapped momentum recently.

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

U.S. consumer confidence dropped to nearly a 1-1/2-year low in July, data showed, pointing to slower economic growth at the start of the third quarter. read more

Advance second-quarter GDP data on Thursday is likely to be negative after the U.S. economy contracted in the first three months of the year.

The International Monetary Fund, meanwhile, cut global growth forecasts again, warning of risks from high inflation and the Ukraine war. read more

At 12:19 p.m. 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 1.17%, at 3,920.60 and the Nasdaq Composite (.IXIC) was down 215.17 points, or 1.83%, at 11,567.50.

Among the Dow components, Coca-Cola Co (KO.N) gained 1.6% 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% after the industrial giant said it planned to spin off its healthcare business. read more

General Electric Co (GE.N) gained 6.6% after the U.S. industrial conglomerate beat revenue and profit estimates, while General Motors Co (GM.N) fell 3.3% after reporting a 40% drop in quarterly net income. read more

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

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

Declining issues outnumbered advancers for a 1.94-to-1 ratio on the NYSE and for a 1.82-to-1 ratio on the Nasdaq.

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

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

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