Walmart and Target, two of the nation’s largest retailers, confirmed this week that headwinds to inflation are intensifying.
“Consumer strength will be tested as Walmart and Target signal that upward pricing pressures are not easing,” wrote Edward Moya, senior markets analyst at Oanda.
TARGET PROFITS CUT BY ALMOST HALF ON INFLATION
On Wednesday, Target stocks fell 25% the most since 1987, contributing to the Dow Jones Industrial Average’s 1,164.52-point skid, pushing the benchmark to its lowest level since March 2021.
THE WHITE HOUSE DOESN’T LOOK AT THE STOCK MARKET EVERY DAY
“Growth was challenged by unusually high costs, which resulted in profitability well below what we expected and where we plan to work overtime,” Target CEO Brian Cornell said Wednesday. , during the company’s earnings call. Adjusted earnings fell 40.7% from the period a year ago to $2.10 per share.
The S&P 500 also persists at the lowest since March 2021, as tracked by the Dow Jones Market Data Group.
MORGAN STANLEY INCREASES CHANCES OF RECESSION
The day before, Walmart shares were hit 11%, also the worst day since 1987, after CEO Doug McMillon offered a sobering outlook.
“On the grocery side, we’re seeing double-digit inflation and I fear that inflation will continue to rise,” he said in response to a question about the retailer’s quarterly earnings call. Adjusted earnings fell 23% to $1.30 per share.
Headline consumer inflation hit 8.3% in April, a 40-year high, with food and fuel prices even higher. Each year, the price of unleaded gasoline increases by 44%, eggs by 22.6% and milk by 14.7%, as indicated by the consumer price index of the Bureau of Labor Statistics.
INFLATION REACHES 8.3% IN APRIL
Rising costs coupled with a decline in consumer spending, which accounts for about 70% of the U.S. economy, could cement a U.S. recession, Jeff Sica of Circle Squared Alternative Investments told FOX Business.
“What we’ve seen in these two major retail earnings reports is that the consumer is on the verge of breaking out and the consumer cutting back with less confidence in the future is showing where we are heading, I believe we are already in recession, but this indicates that we are heading into a deeper recession,” Sica said.
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The US economy surprisingly contracted 1.4% in the first quarter, another straight decline, which would confirm a recession. Currently, second-quarter economic growth estimates remain at 2.4%, as reported by GDPNow, the Federal Reserve Bank of Atlanta’s real-time tracker.