U.S. stock indexes fell on Tuesday after Walmart’s profit warning heightened fears in the retail sector that consumers were cutting back on discretionary spending in the face of decades-high inflation.
Walmart Inc’s shares slumped 8.7%, while Target and Amazon.com fell about 3.0% each, with the online retail giant weighing the most on the Nasdaq index .
“This is what normally happens when inflation is so high or when consumers are having trouble paying their bills,” said Eugenio J. Aleman, chief economist at Raymond James.
“People start to become very discriminating in consumption, so basically they reduce the purchases of discretionary items in favor of necessities.”
In a sign of rising pressure to shore up profit amid higher costs, Amazon said in the run-up to its quarterly financial results that it would raise fees for delivery and streaming service Prime in Europe by up to 43% a year.
The S&P 500 consumer discretionary index slid 1.9%, leading sectoral declines. The S&P 500 retailing index dropped 2.7%.
Along with high inflation, a stronger dollar is also expected to weigh on profits of companies with sprawling global operations.
Wall Street’s main indexes have rallied off mid-June lows as softening commodity prices and downbeat economic data prompt investors to scale back expectations of aggressive rate hikes by the Federal Reserve, but fears of a recession have sapped momentum recently.
The Fed is widely expected to deliver a 75 basis-point interest-rate hike at the end of its two-day policy meeting on Wednesday, which would be followed by comments from Chairman Jerome Powell.
U.S. consumer confidence fell for a third straight month in July amid persistent worries about higher inflation and rising interest rates, data showed, pointing to slower economic growth at the start of the third quarter.
Advance second-quarter GDP data on Thursday is likely to be negative after the U.S. economy contracted in the first three months of the year.
The International Monetary Fund, meanwhile, cut global growth forecasts again, warning of risks from high inflation and the Ukraine war.
At 10:11 a.m. ET, the Dow Jones Industrial Average was down 69.70 points, or 0.22%, at 31,920.34, the S&P 500 was down 21.35 points, or 0.54%, at 3,945.49 and the Nasdaq Composite was down 117.20 points, or 0.99%, at 11,665.47.
Among the Dow components, Coca-Cola Co gained 2.2% after the company raised its full-year revenue forecast, while McDonald’s Corp rose 1.8% after beating quarterly comparable sales and profit expectations.
3M Co rose 5.2% after the industrial giant said it plans to spin off its healthcare business.
General Electric Co gained 6.3% after the U.S. industrial conglomerate beat revenue and profit estimates, led by strong growth in its aviation business.
General Motors Co fell 3.3% after reporting a 40% drop in quarterly net income and saying it was curbing spending and hiring ahead of a potential economic slowdown.
High-growth companies, such as Apple Inc, Netflix Inc, Tesla Inc, fell between 0.2% and 1%, while Alphabet Inc and Microsoft Corp dropped more than 1% each ahead of their quarterly reports after market close.
Earnings from S&P 500 companies are expected to have risen 6.2% for the second quarter from the year-ago period, according to Refinitiv data.
Declining issues outnumbered advancers for a 1.47-to-1 ratio on the NYSE and 2.01-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week high and 30 new lows, while the Nasdaq recorded 21 new highs and 65 new lows.