The Dow Jones Industrial Average sharply sold off on Wednesday, falling over 1,000 points while the Nasdaq led on the downside with losses of well over 4%. Negative earnings and economic data hurt stocks, including a weaker-than-expected housing starts report.
Retail Stocks Dive After Earnings
It's been a difficult day for retail stocks as several leaders plunged to multi-year lows. Target reported earnings that suggested inflation is hurting retailers. The company reported April-quarter profit fell 41% to $2.19 a share, well below estimates for $3.07 a share. Sales rose 4% to $25.17 billion. Same-store sales climbed 3.3%.
Target cited higher freight costs, bigger markdowns and weaker-than-expected sales of bigger-ticket discretionary merchandise. Shares sold off over 27% in heavier-than-normal volume.
Also, Dollar Tree lost more than 20% in heavy volume. But shares found support at the 200-day line. The stock gapped is now below its 144.56 buy point of a double-bottom base. It reports earnings May 26.
Costco held up slightly better but still lost 11% on Wednesday. The stock had recently undercut support at its 200-day line, a bearish sign, and triggered the 8% sell rule. The warehouse retailer recently reported sales for the month of April, showing an increase of 13.9% in U.S. net sales on a year-over-year basis.
Lowe's fell 6.5% after revenue and same-store sales fell more than analysts had expected. Total sales for the first quarter were $23.7 billion compared to $24.4 billion in the first quarter of 2021, and comparable sales decreased 4%. But CEO Marvin R. Ellison said in today's earnings release that "we are pleased with the improved sales trends we are seeing in May."
Dow Jones Today
Also affecting markets on Wednesday were housing starts, which totaled 1.724 million in April. This was down from March's revised number of 1.728 million. Economists polled by Econoday had forecast 1.765 million starts. Additionally, building permits fell to 1.819 million from the prior month's 1.879 million.
The iShares U.S. Home Construction ETF fell 5.6% and remains around January 2021 lows.
On Wednesday, indexes steered further into the downside. The Dow Jones industrials traded down 3.4%, or about 1,100 points, while the S&P 500 lost 3.9%. Meanwhile, the small-cap Russell 2000 held a 3.7% loss, as the Nasdaq declined 4.9%. According to IBD data, volume was running lower on the Nasdaq and higher on the NYSE vs. the same time on Tuesday.
All 11 S&P 500 sectors traded lower, with consumer discretionary and consumer staples stocks getting hit the hardest. Each fell over 6% in Wednesday's market. Meanwhile, the S&P Retail ETF lost over 9%.
The Innovator IBD 50 ETF, a benchmark for growth stocks, lost 4.3%, wiping out all of this week's prior gains.
Aside from several retail-related industry groups, IBD groups leading the downside included trucking transportation stocks, which lost over 10%, and auto manufacturers which fell 7%.
Follow Rachel Fox on Twitter at @IBD_RFox for more Nasdaq and stock market commentary.
