Stock market losses worsened at midday Wednesday, as retail stocks led a broad sell-off that wiped away the major indexes' big gains from the previous session.
The S&P 500 deepened its loss to 2.9% and the Nasdaq composite 3.3% while the Dow Jones Industrial Average lost 2.4%. The Nasdaq has now erased all of Tuesday's 2.8% surge, and more, while the S&P 500 also obliterated Tuesday's 2% jump.
The Russell 2000 still holds a small portion of the prior day's rally, falling 2.6%. While other indexes were trying to rebound at midday, the Russell index continued to sink.
Volume fell on the NYSE and Nasdaq compared with the same time on Tuesday. Decliners outnumbered advancers by more than 4-to-1 on the NYSE and by 5-to-2 on the Nasdaq.
The Innovator IBD 50 ETF fell 3.4% and is on pace to end a four-day win streak. Penske Automotive Group fell back below the 114.44 entry it climbed above last week. Rival AutoNation is still forming a cup with handle but fell below its 200-day line.
Retail Sector Rattled On Latest Results
The retail sector took a hit, with the S&P Retail ETF down more than 7% at midday, after retail results were mainly disappointing and discount-chain stocks sold off.
Target is on track for its worst day since the Black Monday stock market crash on Oct. 19, 1987, when it fell 33%, according to Dow Jones Market Data.
U.S. Stock Market Today Overview |
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|---|---|---|---|---|
| Index | Symbol | Price | Gain/Loss | % Change |
| Dow Jones | (0DJIA) | 31847.68 | -806.91 | -2.47 |
| S&P 500 | (0S&P5) | 3970.45 | -118.40 | -2.90 |
| Nasdaq | (0NDQC ) | 11587.71 | -396.81 | -3.31 |
| Russell 2000 | 177.96 | -4.68 | -2.56 | |
| IBD 50 | 30.51 | -0.89 | -2.83 | |
Last Update: 11:58 AM ET 5/18/2022 |
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Target sold off nearly 25% in huge volume after the company's 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.
Target's plunge echoed Walmart's sell-off Tuesday, when the stock slid more than 11% after disappointing quarterly results. Walmart stock fell an additional 6.2% today. Target stock had been forming a cup-with-handle base, but the handle was already too deep, and today's rout effectively destroys the pattern.
TJX Cos. exceeded profit expectations, but missed sales estimates. The company also warned of a decline in sales for the current quarter. Yet, the parent of T.J. Maxx, HomeGoods and other chains climbed 8.5%.
Stock Market Hits Discount Retailers
Other discount chains slid in sympathy with the sector leaders. Big Lots sold off more than 12% in heavy volume. The company will announce earnings May 27. Dollar Tree got crushed nearly 16% in major volume. The stock gapped further below its 50-day moving average and is now 11% below the 144.56 buy point of a double-bottom base. That's a sell signal. Dollar Tree reports earnings May 26.
Lowe's topped April-quarter earnings, but shares fell 5% as revenue and same-store sales fell more than analysts expected. The stock extended a downward trend that began in December. The 50-day moving average is sloping lower and is below the 200-day line.
In other sectors, quarterly reports were mixed.
Zim Integrated Shipping widened its loss to 6% at midday after the container ship operator beat first-quarter profit expectations early today. The stock is forming a cup base with a 79.05 buy point. The relative strength line is near new highs.
In the chip sector, Analog Devices beat estimates for its April quarter, posting a 56% rise in EPS and 79% rise in revenue. The company raised guidance for the current quarter. But the stock reversed lower.
Housing Starts Fall Again
In economic news, housing starts in April totaled 1.724 million, nearly unchanged from a revised 1.728 million in March. Building permits fell to 1.819 million from March's 1.879 million. Economists polled by Econoday had forecast 1.765 million starts and 1.815 million permits.
"Housing starts fell for the second straight month in April amid a slew of headwinds, including re-intensifying supply chain disruptions, high material costs, and the need for skilled labor," noted BMO Capital Markets economist Priscilla Thiagamoorthy. "Homebuilding is likely to moderate in response to the supply challenges and the sharp acceleration in mortgage rates that are weighing on overall sentiment."
The number of building permits is still above housing starts, which suggests more homebuilding ahead. Still, Thiagamoorthy said the number of single-family homes authorized for construction but not yet started climbed to the highest level in over 15 years. That indicates that backlogs continue to hinder construction activity.
The iShares U.S. Home Construction ETF fell 4.4% and remains around January 2021 lows.
