U.S. equities plunged, finishing near the lows of the day, following disappointing quarterly results from Target Corporation and Lowe's Companies, with both retailers warning of rising cost pressures.
U.S. equities plunged, finishing near the lows of the day, following disappointing quarterly results from Target Corporation and Lowe's Companies, with both retailers warning of rising cost pressures. Persistent inflation pressures have forced the Fed to get aggressive with its monetary policy tightening campaign against the backdrop of slowing economic growth. The downdraft came after stocks rebounded yesterday on some positive retail sales data and signs China's lockdowns may be set to ease. Meanwhile, the ongoing war in Ukraine, rising interest rates, and the recent jump in the U.S. dollar also added to the uneasiness. Housing dominated the economic calendar, with construction activity decelerating, and mortgage applications falling to snap a two-week rebound. Treasuries were mixed, the U.S. dollar finished to the upside to remain near 20-year highs, while crude oil prices declined, and gold lost modest ground. Europe finished mostly lower following further signs of rising inflation pressures in the region, while markets in Asia were mixed.
The Dow Jones Industrial Average tumbled 1,165 points (3.6%) to 31,490, the S&P 500 Index fell 165 points (4.0%) to 3,924, and the Nasdaq Composite plunged 566 points (4.7%) to 11,418. In heavy volume, 5.0 billion shares of NYSE-listed stocks were traded, and 5.0 billion shares changed hands on the Nasdaq. WTI crude oil lost $2.81 to $109.59 per barrel. Elsewhere, the gold spot price traded $3.00 lower to $1,815.90 per ounce, and the Dollar Index was up 0.5% at 103.85.
Target Corporation (TGT $162) reported adjusted Q1 earnings-per-share (EPS) of $2.19, well below the $3.07 FactSet estimate, as revenues rose 4.0% year-over-year (y/y) to $25.2 billion, above the Street's forecast of $24.5 billion. Q1 same-store sales rose 3.3% y/y, versus the expected 0.8% gain. TGT said it faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below its expectations. The company also said its gross margin declined, reflecting higher markdown rates, driven by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as costs related to freight, supply chain disruptions, and increased compensation and headcount in its distribution centers. TGT reaffirmed its full-year revenue growth guidance. Shares of TGT tumbled nearly 25%.
Lowe's Companies Inc. (LOW $184) posted Q1 EPS of $3.51, above the expected $3.22, with revenues declining 2.9% y/y to $23.7 billion, below the forecasted $23.8 billion. Q1 same-store sales fell 4.0% y/y, compared to the estimated 2.5% decline. The home improvement retailer noted increased uncertainty in the macro environment and that its outdoor seasonal categories were impacted by unseasonably cold temperatures. LOW reaffirmed its full-year guidance, noting that now that spring has finally arrived it is pleased with the improved sales trends it is seeing in May. LOW traded solidly lower.