Wall St slips amid Target margin warning
US stock indexes have fallen as elevated Treasury yields hit rate-sensitive growth stocks while Target Corp's gloomy margin forecast spooked the retail sector.
Shares of Target slid 4.0 per cent as the big-box retailer said it would have to offer deeper discounts and cut back on stocking discretionary items.
The weak outlook weighed on other retail stocks, with main rival and Dow component Walmart Inc falling 2.3 per cent.
Dollar General, Nordstrom Inc, Macy's Inc, Costco, Home Depot and Best Buy Co Inc fell between 0.3 per cent and 3.2 per cent.
"When you get inflation elevated and demand cooling off, you do get margin pressure. This was already the case in first-quarter numbers and now we get more indications that it's continued pressure, not just a one-off quarter thing," said Andrea Cicione, head of strategy at TS Lombard.
"It's not doom and gloom, but we think that the downside risk to growth is growing. This is still a market where you want to fade the rallies as opposed to buying the dip."
Nine of the 11 major S&P sectors declined in morning trade, with consumer discretionary sector down 1.5 per cent.
Energy climbed 1.2 per cent while healthcare edged higher.
Interest-rate sensitive technology and growth stocks retreated, as benchmark US 10-year Treasury yields hovered below 3.0 per cent ahead of inflation data on Friday.
Tesla Inc and Amazon.com fell 1.1 per cent and 1.9 per cent respectively to weigh the most on the S&P 500 and the Nasdaq.
A hot reading on the consumer price index could bolster expectations that the Fed will continue to aggressively hike rates in the second half of the year at a time when labour market is buoyant and consumers spending remains resilient.
Money markets are expecting a 50-basis points rate increase next week, followed by July and possibly in September.
"A 50 basis point rate hike is probably appropriate. It may not be keeping pace with inflation but I think going too aggressive would scare the market and not do much good," said Robert Pavlik, senior portfolio manager at Dakota Wealth.
In early trading, the Dow Jones Industrial Average was down 167.50 points, or 0.51 per cent, at 32,748.28, the S&P 500 was down 16.01 points, or 0.39 per cent, at 4,105.42, and the Nasdaq Composite was down 39.43 points, or 0.33 per cent, at 12,021.94.
Global shares also fell as a surprise 50-basis-point rate increase in Australia raised concern over policy tightening while oil prices hovered just below $US120 a barrel.
Block Inc and Affirm Holdings Inc shed 1.3 per cent and 4.7 per cent respectively after Apple launched its buy now, pay later service, called Apple Pay Later.
Kohl's Corp jumped 9.8 per cent as the department store chain entered exclusive talks with retail store operator Franchise Group Inc over a potential sale that would value it at nearly $8 billion.
The CBOE volatility index, Wall Street's fear gauge, rose for a third straight day and was last up at 25.69 points.
Declining issues outnumbered advancers for a 2.16-to-1 ratio on the NYSE and for a 1.52-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week highs and 30 new lows while the Nasdaq recorded 10 new highs and 70 new lows.
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