Stock futures fall as retail sales beat, Target earnings miss

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US stock futures slumped Wednesday morning as Wall Street weighed a profit warning from retail bellwether Target against government retail sales data that showed robust consumer spending ahead of the main holiday season.

Futures linked to the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) hovered below the flatline, while contracts on the tech-heavy Nasdaq Composite (^IXIC) were down 0.2%.

The Commerce Department said Wednesday that retail sales rose 1.3% in October as Americans paid for food, gas and major items last month despite inflationary pressures. Economists polled by Bloomberg expected an overall increase of 1.0% after activity remained flat in the previous month.

Strong pressure could derail the market’s uptrend, with investors likely interpreting robust spending as a sign to Federal Reserve policymakers that aggressive rate hikes can continue.

All eyes were on Target (TGT) as it plunged 15% in premarket trading after a third-quarter earnings report that came in by a wide margin and a weak outlook for the holiday quarter. The retailer was pressured by a slowdown in consumer spending on discretionary goods and said store looting cut its gross profit margin by $400 million so far this year.

“In the closing weeks of the quarter, sales and earnings trends softened significantly, with guest shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty,” Target Chairman and CEO Brian Cornell said in the press release. “This resulted in the publication of the results. A third quarter earnings performance well below our expectations.”

In other parts of the market, the US dollar lost ground, while oil gained slightly as geopolitical jitters eased after a Russian missile hit Poland on Tuesday, reigniting fears of an escalation of Russia’s war in Ukraine. Meeting with NATO allies at the G20 meeting in Bali, Indonesia, on Wednesday, President Joe Biden allayed concerns as he claimed US officials will support Poland in investigating whether the missile was fired from Russia.

Back on domestic territory, equities have held up so far this week after a lighter CPI reading sparked an outrageous relief rally on Thursday. October’s Producer Price Index (PPI), another key inflation gauge, rekindled that optimism during Tuesday’s session, along with comments from Federal Reserve members in recent days suggesting interest rate hikes may slow.

“We should all keep in mind that Fedspeak is pretty disparate right now, and you can take an aggressive or a moderate view depending on which official you ask,” said Mike Loewengart, chief model portfolio construction at Morgan Stanley’s Global Investment Office. in a note. “The market is also processing how much inflation is hitting consumers, with key retail earnings beating expectations and retail sales coming in.”

WASHINGTON, DC – MAY 23: (LR) Vice Chairman of the Federal Reserve Lael Brainard shakes hands with Jerome Powell on May 23, 2022 in Washington, DC. (Photo by Drew Angerer/Getty Images)

On the revenue side, retail earnings other than Target’s have so far beat analyst estimates.

Woonwinkel Lowe’s (LOW) beat analysts’ forecasts on Wednesday. Shares were up nearly 2% before the open, even as the company cut off the top end of its full-year revenue expectation.

Megastore Walmart (WMT) benefited from increased value spending by customers pinched by inflation and a “significant” improvement in inventory abundance, while higher prices helped offset fewer transactions at Home Depot (HD).

Another round of industry peers is still on deck to report, with results from TJX Companies (TJX) and Victoria’s Secret (VSCO) expected Wednesday. Nvidia (NVDA) is another major headliner on the revenue list.

Digital World Acquisition Corp. (DWAC), the special purpose acquisition company set to merge with Donald Trump’s media company, extended this week’s run after the former president officially entered the 2024 presidential race on Tuesday. Shares rose 5% in premarket trading.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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