By Joy Wiltermuth and Frances Yue
The Dow and S&P 500 on Wednesday booked their worst daily plunges in about two years, after quarterly retailer results confirmed higher costs for fuel and wages are eating into profits, and U.S. Treasury Secretary Janet Yellen warned of global stagflation taking root.
All 11 main industry groups in the S&P 500 index were lower, with consumer stocks leading the retreat.
How did stock indexes perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.18% plunged 1,164.52 points, or 3.6%, to finish at 31,490.07, recording its worst daily percentage decline since its 6.9% drop on June 11, 2020, according to Dow Jones Market Data.
The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.05% declined 165.17 points, or 4%, to end at 3,923.68, also its worst daily percentage drop since June 11, 2020.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.05% shed 566.37 points, or 4.7%, finishing at 11,418.15, while recording its worst daily percentage drop since May 5.
The Dow booked its lowest close since March 4, but the S&P 500’s lowest since March 25.
On Tuesday , the Dow Jones Industrial Average gained 431.17 points, or 1.3%, to close at 32,654.59, rising for a third straight day. The S&P 500 climbed 80.84 points, or 2%, to finish at 4,088.85. The Nasdaq Composite jumped 321.73 points, or 2.8%, to end at 11,984.52.
What drove markets?
Wall Street was caught in its worst daily plunge in two years Wednesday, this time sparked by signs of price pressures at big-box retailers that are eating into corporate margins.
Selling hit the consumer sectors hardest, with Target Corp. TGT shares tumbling 24.9% after the retailer reported earnings that fell far short of expectations . But tech, energy and other swaths of the market also were swept up.
“Obviously, the pressures we are seeing are from Target, following Walmart, in acknowledging price pressures,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management, by phone.
“I think that people involved in the market are now going to be even more concerned with inflation, and the pressures that it brings to things like margins,” he said. “But sometimes, it’s also run for the hills and ask questions later.”
Pavlik also said there wasn’t much conviction in the market. “As someone who might be willing to do some buying of quality companies, why should I step in now, when prices are likely still going to go down?”
Shares of Lowe’s Cos. LOW fell on mixed results from the home-improvement retailer. TJX Cos. /zigman2/quotes/203136811/composite TJX -0.10% gained 7.1% Wednesday after the TJ Maxx operator reported double-digit percentage growth in earnings for its first quarter. Cisco Systems Inc. CSCO will report after the close.
Goldman Sachs CEO David Solomon also came out with a recession warning as the Fed raises rates and beings shrinking it balance sheet to move against high inflation, in a CNBC interview Wednesday . Economists at the bank see a roughly 30% chance of a recession in the next 12 to 24 months.