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U.S. stocks fell early Tuesday after a profit warning from Target renewed concerns about the economic outlook.
The S&P 500 sank 0.8%, and the Dow Jones Industrial Average shed nearly 200 points. The tech-heavy Nasdaq slid 1%. Meanwhile, the 10-year U.S. Treasury benchmark held above 3%.
Target (TGT) was in focus during the morning trade after the retailer said Tuesday that it’s aiming to trim down excess inventory by offering discounts, canceling orders and reevaluating its expenses – an announcement that comes just weeks after the company shocked investors with a dramatic earnings miss that sent shares down 25%.
Target’s stock fell roughly 6% at open. The decline also weighed on retail peers amid renewed worries about the toll of inflation and supply chain imbalances on corporate margins. Shares of Walmart (WMT) and Costco (COST) each fell about 2% at the start of trading.
“The fear in the market is that earnings estimates, underpinned by weaker net profit margins, could become the next layer of focus,” LPL Financial Chief Equity Strategist Quincy Krosby said in a recent note.
The moves in futures trading Tuesday extend a streak of back-and-forth sessions as investors assess the economic outlook and brace for central bank policymakers to ramp up interest rates in an effort to cool inflation.
All three major indexes closed in the green on Monday, though well off the session’s highs after wavering from a morning rally. The S&P 500 closed up 0.3% after retreating from a jump of more than 1%, the Dow erased a 300-point gain to end just above breakeven, and the Nasdaq climbed 0.4%.
“For now, the market sees a Federal Reserve trying to navigate a painful and bumpy road, yet trying to find a soft exit,” Krosby said. “And the market finds itself between wanting to believe in the rallies but not believing that the Fed can negotiate a soft landing.”
Inflation is top of mind for investors this week, with the Bureau of Labor Statistics’ May Consumer Price Index (CPI) due out Friday. Wall Street will be looking for signs that prices have peaked as it hopes for a pause on monetary tightening in the autumn months.
Outside of Friday’s CPI print, investors face a lighter economic and earnings calendar this week.
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