Stocks Fall As Target Leads Retail Shares Lower
2:36 pm Wednesday, November 16th, 2022
Today’s trade has been a bit mixed thus far. The S&P 500 and Nasdaq have been chopping around in negative territory while the Dow has dipped in and out of the green. The market is in consolidation mode after the big run recently that saw the S&P 500 and Nasdaq Composite gain 6.5% and 9.7%, respectively, over the last week.
Selling efforts have been fueled by disappointing earnings and guidance for the holiday quarter from Target (TGT) and an indication from Micron (MU 59.03, -4.06, -6.4%) that it is cutting its DRAM and NAND wafer starts by ~20%, saying that the market outlook for calendar 2023 has recently weakened. Micron also said it is working toward additional capex cuts.
These factors have prevailed over the better-than-expected quarterly results from Lowe’s (LOW) and a stronger-than-expected Retail Sales Report for October.
The main concern resonating with market participants, which could be reflected in falling Treasury yields (10-yr note -8 bps to 3.73%) despite the stronger-than-expected retail sales data, is that discretionary spending activity is apt to slow in coming months as more consumers feel the pinch of rising interest rates, stubbornly high inflation, a reduced wealth effect, and increased layoff announcements and concerns about job security.
Broad selling efforts have eight of the 11 S&P 500 sectors trading down. Energy (-1.7%) shows the steepest loss amid falling oil prices ($85.16/bbl, -1.75, -2.0%).
The consumer discretionary sector (-0.8%) is another top laggard today. Heaving selling of Target weighs on sector losses, but the worst performing component is Advance Auto (AAP), which also disappointed with its earnings and guidance.
The only sectors in the green are the counter-cyclical health care (+0.3%), consumer staples (+0.5%), and utilities (+0.9%) sectors.
The 2-yr note yield is up one basis point to 4.36%, as buying interest has been concentrated in longer-dated securities. Earlier, San Francisco Fed President Daly (2024 FOMC voter) said that the idea of the Fed pausing its rate hikes is not even on the table for discussion right now and that she thinks a 5.00% fed funds rate is a reasonable level where the Fed can hold rates.
