Dow falls 900 points as strong sales return to Wall Street after poor results from Target and Walmart

US stocks fell sharply on Wednesday after another major retailer warned of mounting cost pressures, confirming inflation fears that have led major benchmarks to big losses this year.

The Dow Jones Industrial Average lost 962 points, or 2.9%, with the average set for its first loss in four days. S&P 500 traded 3.4% lower, while the Nasdaq Composite fell 4.1%.

Markets were heavily sold again after two consecutive quarterly reports from Target and Walmart raised investor fears about rising inflation. It’s the Dow’s fifth drop of more than 800 points this year, all of which occurred as the stock selloff intensified in the past month, according to data from FactSet.

“It is clear that transportation costs matter and are impacting [some of] the biggest companies,” said Kim Forrest, founder of Bokeh Capital. “So I think investors are scratching their heads thinking, ‘so who’s next?’ And they are giving visibility to what is happening with the consumer.”

Target shares fell more than 26% on Wednesday after the retailer reported first-quarter earnings that were much lower than Wall Street estimates due to higher fuel and compensation costs. The retailer also saw lower-than-expected sales of discretionary products like televisions.

The retailer’s report comes just after Walmart posted earnings on Tuesday that missed expectations as it also cited higher fuel and labor costs. Walmart shares ended Tuesday down 11%. They were down another 6% on Wednesday.

“The consumer is challenged,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “We started to see at the end of the year that consumers were turning to credit cards to pay for rising food prices, rising energy prices, and that’s actually gotten a lot worse… This is going hurt the retail leaders. places and Walmart tends to be one of them.

Other retailers were hurt by Target’s quarterly profit loss: The SPDR S&P Retail ETF fell more than 7%. Best Buy’s stock price fell more than 10%, Dollar General’s fell more than 11%, and Dollar Tree’s fell more than 16%. Macy’s shares fell 10%, while Kohl’s shares fell more than 10%.

Lowe’s shares fell more than 5% after missing sales expectations in its first-quarter report as shoppers bought fewer supplies for outdoor projects.

“Any business that relies on households and discretionary purchases is likely to suffer this quarter because a lot of discretionary income has been funneled into food and energy prices,” said Jack Ablin, founding partner at Cresset Capital.

TJX Companies, parent of TJ Maxx, bucked the overall negative trend, with shares rising 8% after the retailer reported rising earnings.

Wednesday’s market reversal comes after stocks had been recovering from year lows. On Tuesday, the Dow rose 431 points, or 1.3%, while the S&P 500 gained 2% and the Nasdaq Composite rose nearly 2.8%.

The Dow has declined for seven straight weeks, but stocks have stabilized during the previous three trading sessions. Last week, the S&P 500 fell to the brink of a bear market, or 20% below its all-time high, but the index has since recovered slightly.

Despite the recent recovery, the S&P 500 is down 17% for the year, while the Nasdaq Composite is down 26%.

Gasoline prices have risen steadily, contributing to inflationary pressures seen throughout the economy. The national average for a gallon of regular gasoline reached a record high of $4,567 on Wednesday, according to AAA. Prices are 48 cents higher than a month ago and $1.52 higher than what consumers paid last year.

Every state now averages more than $4 a gallon, with some states paying much more. In California, the state average has topped $6.

The yield on the benchmark 10-year Treasury note fell below 2.9% after briefly topping 3% on Wednesday morning.

Stocks and other risky assets have come under pressure from inflation and the Federal Reserve’s attempt to contain price gains through rate hikes, raising concerns about a potential recession. Fed Chairman Jerome Powell told a Wall Street Journal conference on Tuesday that “there will be no question” about raising rates until inflation is under control.

— CNBC’s Pippa Stevens contributed to this report.

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