US stock indexes fell early in trading after rising costs weighed on some companies’ profits, prompting Wall Street to increase volatility throughout the year.
The Dow Jones Industrial Average fell 400 points shortly after opening on Wednesday, down about 1.3 percent. The S&P 500 fell 1.5% and the technology-focused Nasdaq Composite fell 1.7%. Shares of technology led to a recovery in markets on Tuesday.
Shares of retailer Target fell 24 percent after the company reported quarterly gains that did not live up to analysts’ expectations of supply chain costs and inflationary pressures. If such a decline persisted during trading day, it would be the worst day for the company’s stock to perform since the October 1987 market crash.
Shares of Walmart fell 3.7 percent, extending the 11 percent decline on Tuesday after the retailer said it was under pressure from higher food prices and other rising costs.
Shares of TJX added 7.3% after the clothing and home retailer said its earnings rose 10% in the first quarter.
Shares have fallen sharply in recent weeks as investors consider the global economic outlook, central banks’ plans to curb inflation, geopolitical tensions and China’s zero-Covid strategy. The culmination of the factors increased the volatility of the markets. Even with Tuesday’s rally, the S&P 500 has fallen about 15% this year.
At the forefront of investors’ minds is decades of high inflation in the United States, how many politicians are willing to tighten financial conditions to conquer it, and what this means for economic growth. Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank’s determination to fight inflation should not be questioned, even if it requires rising unemployment.
“Our expectations are that growth will begin to slow in the next few months,” said Salman Ahmed, global macro chief at Fidelity International, adding that he expects the Fed’s actions to help curb inflation. “Then the next step for the Fed will be to focus on the shock of growth.”
Markets seem to be increasingly volatile: stocks, bonds and cryptocurrencies are falling as investors struggle to manage the large fluctuations that are shaking financial markets around the world. WSJ’s Caitlin McCabe looks at some of the reasons behind the recent market frenzy. Photo: Spencer Platt / Getty Images
The combination of market concerns has prompted Mr Ahmed to take a more cautious investment approach in recent weeks, he said.
Investors are also watching to see if Russia’s war against Ukraine could further heighten geopolitical tensions. Finland and Sweden formally applied for NATO membership on Wednesday, a move that, if approved, would fundamentally change the security landscape in northern Europe.
In the bond markets, the yield on the benchmark 10-year government securities rose to 2.985% from 2.969% on Tuesday. Profitability and prices are moving backwards.
Brent crude, the international benchmark for oil, added 0.3% to $ 112.30 a barrel. Oil prices have been highly responsive in recent months to both Russia’s war on Ukraine, which could disrupt supplies, and the blockage in major Chinese cities, which are cutting demand. The Shanghai government has begun preparing the city for reopening.
Abroad, the Pan-Continental Stoxx Europe 600 fell 0.8%. The British pound fell about 0.6% against the dollar after new data showed that annual inflation in the UK reached a four-decade high of 9% in April as higher energy prices were fueled by utility bills household services.
In Asia, new data showed that Japan’s economy contracted in the first three months of this year, when restrictions on the resumption of Covid-19 infections held back consumer spending. However, the Japanese Nikkei 225 closed 0.9% higher.
On Monday, traders worked on the floor of the New York Stock Exchange.
Photo: Courtney Crow / Associated Press
South Korea’s Kospi and Hong Kong’s Hang Seng added 0.2% on Wednesday. China’s Shanghai Composite fell about 0.2%.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
Adjustments and reinforcements Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank’s determination to fight inflation should not be questioned. An earlier version of this article incorrectly said that Mr. Powell made the statement on Wednesday. (Corrected May 18)
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