Walmart Warning Contributes To Sell-Off On Wall Street

Following the mixed performance seen during Monday’s session, stocks moved sharply lower over the course of the trading day on Tuesday. The major averages all showed notable moves to the downside, with the tech-heavy Nasdaq showing a particularly steep drop.

The major averages climbed off their worst levels going into the close but remained firmly negative. While the Nasdaq tumbled 220.09 points or 1.9 percent to 11,562.57, the S&P 500 slumped 45.79 points or 1.2 percent to 3,921.05 and the Dow slid 228.50 points or 0.7 percent to 31,761.54.

A steep drop by shares of Walmart (WMT) weighed on the markets, with the retail giant plunging by 7.6 percent to its lowest closing level in almost a month.

Walmart came under pressure after lowering its guidance for the second quarter and full year primarily due to pricing actions aimed to improve inventory levels.

Auto giant General Motors (GM) also moved to the downside after reporting second quarter earnings that missed analyst estimates.

Meanwhile, a strong gain by 3M (MMM) limited the downside for the Dow, with the conglomerate jumping by 4.9 percent after reporting better than expected second quarter results and announcing plans to spin off its health care business.

Shares of General Electric (GE) also surged after the conglomerate reported second quarter results that exceeded expectations on both the top and bottom lines.

The weakness on Wall Street also came as traders looked ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed is widely expected to announce another 75 basis point rate hike as part of its efforts to combat elevated inflation.

In U.S. economic news, the Commerce Department released a report showing new home sales pullback by more than expected in the month of June.

The report said new home sales plunged by 8.1 percent to an annual rate of 590,000 in June after jumping by 6.3 percent to a revised rate of 642,000 in May.

Economists had expected new home sales to tumble by 5.2 percent to an annual rate of 660,000 from the 696,000 originally reported for the previous month.

With the bigger than expected decrease, new home sales slumped to their lowest annual rate since hitting 582,000 in April 2020.

A separate report released by the Conference Board showed consumer confidence in the U.S. deteriorated by more than expected in the month of July.

The Conference Board said its consumer confidence index slid to 95.7 in July from a downwardly revised 98.4 in June. Economists had expected the index to drop to 96.8 from the 98.7 originally reported for the previous month.

Sector News

Retail stocks moved sharply lower following the warning from Walmart, dragging the Dow Jones U.S. Retail Index down by 4 percent.

The index continued to give back ground after ending last Thursday’s trading at its best closing level in well over two months.

Significant weakness was also visible among airline stocks, as reflected by the 2.7 percent nosedive by the NYSE Arca Airline Index.

Financial stocks also showed notable moves to the downside on the day, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index slumping by 2.2 percent and 1.7 percent, respectively.

Semiconductor and oil stocks also saw considerable weakness, while gold stocks bucked the downtrend despite a modest decrease by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan’s Nikkei 225 Index edged down by 0.2 percent, while China’s Shanghai Composite Index advanced by 0.8 percent.

Meanwhile, European stocks moved mostly lower on the day. While the U.K.’s FTSE 100 Index closed nearly unchanged, the French CAC 40 Index fell by 0.4 percent and the German DAX Index slumped by 0.9 percent.

In the bond market, treasuries gave back ground after an early rally but remained positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.3 basis points to 2.787 percent after hitting a three-month intraday low of 2.707 percent.

Looking Ahead

Trading on Wednesday is likely to be driven by reaction to the Federal Reserve’s monetary policy decision and accompanying statement.

Ahead of the Fed announcement, traders are likely to keep an eye on reports on durable goods orders and pending home sales.

On the earnings front, Alphabet (GOOGL), Microsoft (MSFT), and Visa (V) are among the companies releasing their quarterly results after the close of today’s trading.

Boeing (BA), Bristol-Myers Squibb (BMY), Kraft Heinz (KHC), and Spotify (SPOT) are also among the companies due to report their quarterly results before the start of trading on Wednesday.

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