The stock market fell Wednesday after lower-than-expected industrial production, despite a rise in retail sales. A mixed Q3 report and dour holiday sales outlook from Target put a damper on stocks.
The Nasdaq composite fell 1.2% and the S&P 500 dropped 0.5%. The Dow Jones Industrial Average was flat. The small-cap Russell 2000 index eased 1.6%.
Volume fell on the NYSE and the Nasdaq vs. the same time on Tuesday.
The yield on the benchmark 10-year Treasury note dropped 14 basis points to 3.73%. Crude oil prices fell 2.8% to $84.50 per barrel.
Stock Market Falls On Lower Industrial Production
Retail sales rose 1.4% in October, better than 1% consensus estimates and above August's 0% change.
"Consumer spending remains extremely strong," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. "In the short run, the market has momentum to go higher. In the eyes of the bulls, inflation has peaked, the Fed is in the process of slowing down the pace and magnitude of their rate hikes, and there doesn't appear to be signs of a recession. The Fed is going to keep raising rates into next year, and is likely to keep those rates elevated for much, if not all of next year."
The probability the Fed will raise rates by 0.5% in December is pegged at 80.6% while odds for a 75-basis-point hike are 19.4%, according to the CME FedWatch tool.
By contrast, industrial production was weaker than expected in October, dropping 0.1%, whereas economists were expected a gain of 0.2%. And the housing market index also slid to 33 in November, lower than the consensus of 36.
"Homebuilders have become very pessimistic about the housing outlook with mortgage rates hovering around 7% pushing homeownership out of reach for many aspiring homebuyers," said Bill Adams, chief economist for Comerica Bank. "Manufacturing is cooling off too with less demand for construction materials, lower sales of the goods that consumers splurged on during the stay-at-home economy's boom. And headwinds from a strong dollar and weak foreign economies."
In stock market action elsewhere, European stocks fell one day after a missile struck Poland. The U.K. added to the bearish narrative, reporting that inflation hit an 11.1% annual rate. The FTSE 100 dropped 0.2%, the German DAX 0.9%, and the French CAC 40 0.5%.
Target Gives Weak Outlook For Holiday Sales
Target reported third-quarter earnings far below estimates early Wednesday and warned on the holiday quarter, citing weakening consumer spending trends. The report was among factors pushing the stock market lower Wednesday.
TGT stock plunged nearly 15%, gapping down below its 50-day moving average. The stock is on pace for its largest share price percentage decrease since May 18, when it fell 24.93%.
Earnings at the big-box retailer tumbled 49% to $1.54 per share vs. views for $2.18. The dismal results add to an 89% earnings plunge in Q2 and 41% in Q1, amid costly inventory liquidations. Sales rose 3.4% to $26.52 billion, just topping forecasts for $26.4 billion. Same-store sales climbed 2.7% vs. estimates for 2.2%.
Target sees declining sales in the crucial holiday fourth quarter.
"Based on softening sales and profit trends that emerged late in the third quarter and persisted into November, the company believes it is prudent to plan for a wide range of sales outcomes in the fourth quarter, centered around a low-single digit decline in comparable sales, consistent with those recent trends," the company said in its earnings release.
Tencent Holdings reported third-quarter earnings early Wednesday that topped estimates but sales were a tad light. TCEHY stock rose nearly 5%.
The China-based internet services company reported earnings of 47 cents per share on revenue of $19.7 billion. Analysts expected Tencent to report earnings of 45 cents on revenue of $20 billion. Sales fell 2% year over year in local currency.
Wednesday's Stock Market: Lowe's Beats Estimates
Lowe's topped third-quarter expectations Wednesday morning, a day after Dow Jones rival Home Depot beat estimates. LOW stock rose nearly 5% after its results, while HD gained 1.2%.
The home-improvement giant readjusted its full year outlook, raising its earnings forecast to range from $13.65 to $13.80 per share, up from its earlier projection for $13.10 to $13.60. However, its forecast for total sales between $97 billion and $98 billion marks a slight dip from its previous outlook of $97 billion to $99 billion. Meanwhile, analysts expect annual EPS of $13.39 on $98.11 billion in revenue.
Home goods retailer TJX reported mixed third-quarter results early Wednesday. Shares traded up 3%.
Carnival dropped more than 13% in the stock market after initiating a private offering of $1 billion of convertible senior notes due 2027, to be used as part of the company's 2024 refinancing plan.
Micron Technology fell more than 5% after the chipmaker said Wednesday that it is slashing production of memory chips, citing weak demand. The news pulled down semiconductor stocks broadly. The Boise, Idaho-based company said it is reducing its wafer starts for DRAM and NAND memory chips by about 20% in the current quarter vs. the same period last year.
Digital World Acquisition Corp. stock fell more than 5% Wednesday after former President Donald Trump announced Tuesday night he will once again seek the Republican nomination as presidential candidate in 2024.
Electric-vehicle giant Tesla traded down 3% but is still well above last week's 52-week low price at 177.12. Nonetheless, the stock is more than 50% off its 52-week high and sharply below its 50- and 200-day moving average lines.
The Innovator IBD 50 ETF fell 1.3%, weighed down by computer hardware maker Super Micro Computer and chip stock On Semiconductor.
Follow Michael Molinski on Twitter @IMmolinski
