U.S. stocks fell on Wednesday as investors weighed strong earnings reports from big-box retailers against lingering inflation concerns and continued digesting better-than-expected retail data.
The Dow Jones Industrial Average fell 195 points, or 0.4%. The S&P 500 and the Nasdaq Composite lost 0.1%. The Dow was dragged down by a 5% drop in Visa.
Target posted beats on the top and bottom lines, but its CEO noted rising costs may have an impact on the company going forward as it plans to absorb those costs rather than pass them onto the customer. Shares slid about 5%.
Home improvement giant Lowe’s saw shares rise slightly, however, after the company not only topped estimates from the Street but also raised its full-year sales forecast. And shares of TJX jumped almost 9% after the apparel and home retailer reported a quarterly earnings beat on the top and bottom lines as well as a same-store sales increase of 14% year-over-year.
“The consumer is spending and engaging in this economy at a level that is beating expectations,” said Keith Buchanan, portfolio manager at GLOBALT. “What’s hammered the market though is that for Target and Walmart, the two biggest retailers in the country from a brick-and-mortar standpoint, the costs of running those businesses are outpacing the strong consumer, so they’re missing on margins.”
Walmart on Tuesday reported better-than-expected results, though its shares declined.
The SPDR S&P Retail ETF lost 2% Wednesday, though retailers are encouraged by same-store sales gains driven largely by higher traffic and solid digital growth amid pent-up demand from consumers over the summer.
Elsewhere, shares of Dow component Boeing rose nearly 2% after the company received an Akasa Air order for its 737 MAX worth $9 billion. The aerospace company’s stock has been a laggard this year, up just 6.5%.
On the downside, Visa shares slumped 5% after Amazon said it will stop accepting payments made with Visa credit cards issued in the U.K. starting next year. That change came shortly after Visa raised its interchange fees for transactions between the U.K. and European Union. Mastercard, which has also increased its U.K.-EU interchange fees, fell 4.5% with Visa.
“U.S. stocks rallied after an impressive retail sales report, solid industrial production data, and retail earnings showed the consumer is handling the current pricing increases. All signs are pointing to a very strong holiday season for retailers and that should help keep sending stocks higher,” Edward Moya, senior market analyst at Oanda, said in a Tuesday note.
The markets are coming off a more positive day for all three of the major averages. On Tuesday, the Dow added 54.77 points, or 0.15%. The S&P 500 gained 0.39% and the Nasdaq Composite rose 0.76%. Those moves came after fresh economic data and corporate earnings signaled U.S. consumers are ramping up spending despite rising prices.
Retail sales rose 1.7% in October, the Commerce Department reported Tuesday, faster than economists expected. The figure measures how much consumers spend on goods across a number of categories.
Investors await more retail earnings Wednesday from Bath & Body Works and Victoria’s Secret. Other major companies reporting results include Cisco Systems and Nvidia.