By Ambar Warrick and David French
NEW YORK (Reuters) – Wall Street indexes fell on Wednesday as investors bet on early rate hikes by the Federal Reserve after strong retail earnings, although supply chain concerns sent retail stocks lower.
Target Corp was the latest big-name retailer to report positive results, as it raised its annual forecasts and beat profit expectations, citing an early start to holiday shopping.
But shares of the firm fell 4.7%, tracking declines in those of peer Walmart on Tuesday, as both retailers flagged a hit to their third-quarter margins from supply chain issues.
Other retailers yet to report earnings traded lower. Macy’s Inc and Kohls Corp were both down almost 5%, ahead of posting numbers on Thursday morning. Gap Inc and Urban Outfitters Inc, on deck next week, slid 4.4% and 3.6%.
Some retailers bucked the trend. TJX Companies Inc was 7.5% up after hitting an all-time high earlier in the session. The T.J. Maxx owner reported estimate-beating earnings, an increase in its share buyback program, and forecast it was well positioned to meet holiday-season demand.
Lowe’s Cos Inc rose 1.6% after the home improvement chain raised its full-year sales forecast on higher demand from builders and contractors, as well as a strong U.S. housing market. Peer Home Depot had also reported strong results on Tuesday.
The Dow was also weighed by Visa Inc, which slumped 6.3% after Amazon.com Inc said it would stop accepting cards issued by the operator in the UK due to the high fees charged for transactions.
Losses in the Nasdaq were tempered by major technology shares, which tend to gain in times of high market uncertainty.
While strong retail data this week showed that a rise in inflation has not stifled economic growth so far, investors feared that further increases in prices could hurt growth and push the Federal Reserve into tightening policy ahead of schedule.
“The inflation fear is still there and those keep creeping in and discussion that we’re having of – is it transitory, is it supply driven – that’s still in the market,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
“The Fed will hold as long as they can … But if (inflation) continues to go higher, and you continue to see inflationary pressure, then it becomes a question of how many and how often will (rates) rise.”
Contrasting comments from Fed Presidents James Bullard and Mary Daly on Tuesday also brewed more uncertainty in markets.
Strong retail earnings this week will round off an upbeat third-quarter earnings season, which had pushed Wall Street indexes to record highs.
Investors were awaiting third-quarter results from Nvidia Corp, due after the bell. Shares of the chipmaker fell 2% but were trading just below record highs.
The Philadelphia semiconductor index, down 0.5%, also hovered below all-time highs.
By 1:47 p.m. ET, the Dow Jones Industrial Average fell 162.68 points, or 0.45%, to 35,979.54, the S&P 500 lost 6.75 points, or 0.14%, to 4,694.15 and the Nasdaq Composite dropped 23.54 points, or 0.15%, to 15,950.32.
Tesla rose 3%, while peer Canoo added 1.8% amid growing demand for EV stocks on Wall Street.
But Rivian Automotive Inc tumbled 16.7%, as investors locked in gains from a near 71% winning streak since the stock’s listing last week.
(Reporting by Ambar Warrick and Devik Jain in Bengaluru and David French in New York; Editing by Maju Samuel and Lisa Shumaker)
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