Day Traders Diary

5/18/22

The Dow Jones Industrial Average headed for 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 points, or 3.57%, to 31,490, or the average's biggest decline since June 2020. The S&P 500 traded 4.04% lower or 165 points to 3,923, also the worst drop since 2020. The Nasdaq Composite slipped 566 points or 4.73% to 11,418 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. 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, according to FactSet data.

Target shares tumbled more than 27% Wednesday after the retailer reported first-quarter earnings that were much lower than Wall Street estimated because of higher costs for fuel and compensation. The retailer also saw lower-than-expected sales for discretionary merchandise like TVs.

The retailer's report comes right after Walmart on Tuesday posted earnings that fell short of expectations as it too cited higher fuel and labor costs. Walmart shares ended Tuesday lower by 11%. They were down another 7% on Wednesday.

Other retailers took a hit on the back of Target's quarterly earnings miss — with the SPDR S&P Retail ETF falling more than 8%. Amazon's stock price dropped 6.6%, and Best Buy's stock price fell more than 11%. Dollar General's fell more than 11%, and Dollar Tree's declined more than 15%. Shares of Macy's dropped 12%, while shares of Kohl's fell more than 10%.

Lowe's fell more than 6% after missing sales expectations in its first quarter report as shoppers bought fewer supplies for outdoor projects.

TJ Maxx-parent TJX Companies bucked the overall negative trend, with shares surging 6% after the retailer reported an earnings beat.

Stocks and other risk assets have been pressured by inflation and the Federal Reserve's attempt to tamp down price increases through rate hikes, which have led to concerns about a potential recession.

In an appearance Wednesday on CNBC's "The Exchange," Jeremy Grantham said the current downturn is worse than the tech bubble of 2000. The investor, known for identifying market bubbles, said stocks can more than double their losses.

The yield on the benchmark 10-year Treasury note dipped below 2.9% after briefly topping 3% on Wednesday morning.

The Dow has declined for seven straight weeks, but stocks had stabilized over the previous three trading sessions. Last week, the S&P 500 fell to the brink of a bear market — or 20% below its record high.