By Shreyashi Sanyal and Aniruddha Ghosh
July 26 (Reuters) – U.S. stock indexes fell on Tuesday after Walmart’s profit warning heightened fears in the retail sector that consumers are cutting discretionary spending in the face of decades-high inflation.
Shares of Walmart Inc. WMT.N fell 7.7%, while those of Target Corp TGT.N and Amazon.com Inc. AMZN.O fell more than 4% each, with the online retail giant weighing the most on the Nasdaq index .IXIC.
In a sign of growing pressure to shore up profits amid higher costs, Amazon said it would raise Prime delivery and streaming service fees in Europe by up to 43% a year.
The S&P 500 Consumer Discretionary Index .SPLRCD slid 3.2%, leading to sectoral declines. The S&P 500 retail index .SPXRT fell 3.9%.
“Walmart’s problems are widely expected to be symptomatic of the entire retail space,” said Chuck Lieberman, chief investment officer at Advisor Capital Management.
“There’s no question that inflation is higher than people are comfortable with, and that’s likely to remain the case for some time.”
Along with high inflation, a stronger dollar is also expected to weigh on earnings for companies with sprawling global operations.
Major Wall Street indices have rallied from mid-June lows as falling commodity prices and pessimistic economic data prompt investors to scale back expectations of aggressive rate hikes by the Federal Reserve. , but fears of a recession have recently undermined momentum.
The Fed is expected to hike interest rates by 75 basis points at the end of its two-day policy meeting on Wednesday, which would be followed by comments from Chairman Jerome Powell.
U.S. consumer confidence fell to nearly a year-and-a-half low in July, the data showed, pointing to slowing economic growth at the start of the third quarter.
Advanced second-quarter GDP data released on Thursday is expected to be negative after the US economy contracted in the first three months of the year.
The International Monetary Fund, meanwhile, slashed its global growth forecast again, warning of risks from high inflation and the war in Ukraine.
As of 12:19 p.m. ET, the Dow Jones Industrial Average .DJI was down 178.18 points, or 0.56%, at 31,811.86, the S&P 500 .SPX was down 46.24 points, or 1.17%, at 3,920.60 and the Nasdaq Composite .IXIC was down 215.17 points, or 1.83%, at 11,567.50.
Among the components of Dow, Coca-Cola Co KO.N gained 1.6% after the company raised its full-year revenue forecast, while McDonald’s Corp MCD.N rose 2.6% after beating quarterly expectations.
3M Co MMM.N rose 6.4% after the industrial giant announced plans to spin off its healthcare business.
General electric company GE.N gained 6.6% after the US industrial conglomerate beat revenue and profit estimates, while General Motors Co GM.N fell 3.3% after announcing a 40% decline in quarterly net profit.
Apple Inc. AAPL.ONetflix Inc. NFLX.OTesla Inc. TSLA.O fell about 1.5% each, while Alphabet Inc GOOGL.O and Microsoft Corp. MSFT.O were down around 2.5% and 3.2%, respectively, before their quarterly reports after market close.
According to data from Refinitiv, profits for S&P 500 companies are expected to have risen 6.2% in the second quarter compared to the year-ago period.
Falling issues outnumbered advances by a 1.94-to-1 ratio on the NYSE and by a 1.82-to-1 ratio on the Nasdaq.
The S&P index recorded a new 52-week high and 30 new lows, while the Nasdaq recorded 28 new highs and 103 new lows.
Reporting by Shreyashi Sanyal and Aniruddha Ghosh in Bengaluru; Editing by Arun Koyyur and Anil D’Silva
