Stocks turn sharply lower

After Tuesday’s big rally on Wall Street, you would expect to see some follow-through. But this is a bear market. Big gains don’t tend to last. Lo and behold, the markets have dropped sharply yet again after a big rally. 

This time, there is no single trigger to point to. It is a combination of factors, mostly fears over and economic slowdown and rising interest rates.

Off Target

But we also had yet another US retail missing the target. “Off Target,” if you will. A 25% drop in Target shares at the open was the biggest since 1987 after the US retail badly missed expectations on earnings amid "unexpectedly high costs." On Tuesday, it was Walmart which plunged by some 11%, the most in 35 years, as it cut its outlook because of inflationary pressures. 

Retailer woes likely to continue amid stagflation risks

The big falls in shares of these retails – and don’t forget Amazon – highlights the damage inflation is inflicting on the sector’s profit margins. What’s more, consumers are getting squeezed as well and if they now start to cut back on spending then retailers could suffer even further. The outlook does look great. Producers will passing on raised input costs onto consumers, and this will ensure inflation is not going to be easing significantly any time soon. 

Keep an eye on S&P

The S&P 500 index has given up most of the gains from the day before and if it closes today’s session below 4000 then this would be a fresh bearish signal that could then see the index start a new downward motion to a new low for the year.