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Stock markets sell off as inflation fears take hold

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Stock markets were a sea of ​​red on Wednesday as financial results from major retailers suggested they were struggling to cope with stubbornly high inflation.

The S&P 500 fell more than 4%, its worst one-day performance since June 2020, as investors reacted to troubling signs that consumers are slowing spending in the face of high prices.

Target shares lost more than 25% of their value after the retailer said its profits had been cut in half due to higher costs and supply chain issues. It was the worst day for Target stock since Black Monday in 1987, and it came a day after rival Walmart painted a similar picture the day before.

Walmart shares fell more than 11% on Tuesday and another 7% on Wednesday, after the retailer warned of lower profits ahead due to rising transportation costs and wages, as well as problems of supply chain. Tuesday’s selloff was also the biggest one-day drop in Walmart stock since 1987.

This gloom from two cost-conscious retailers has investors worried that if they’re having trouble managing high inflation, many others must be too.

“Consumer strength will be tested as Walmart and Target signal mounting pricing pressures are not abating,” said analyst Edward Moya of exchange firm Oanda.

The Dow Jones Industrial Average lost nearly 1,200 points or more than three percent and the technology-focused Nasdaq lost more than 500 points or more than four percent.

“Stocks are tumbling after Wall Street fretted over economic growth after hearing a chorus of concerns about higher prices that won’t subside anytime soon,” Moya said.

Statistics Canada reported on Wednesday that the country’s inflation rate rose again last month, to a new 31-year high of 6.8%.

Although the Toronto Stock Exchange fared better than its U.S. counterparts, it was not immune to the selloff, losing 389 points, or about 2%, to close just over 20,100 points late in the week. the trading day. The index has lost about 10% of its value since the beginning of the month.

“It’s a really tough day for the stock markets,” Colin Cieszynski, chief market strategist at SIA Wealth Management, said in an interview with CBC News.

“Retailers in particular are starting to get stuck between rising costs and slowing demand,” he said. “We just saw an exit rush in the stock markets today.”

Tech stocks hit hard

Tech stocks, which soared earlier in the pandemic as the world became increasingly digital and online due to COVID-19 lockdowns, continue to take a beating.

Apple shares fell 6% to trade at their lowest level since October. Amazon shares are down seven percent and the shares are now trading where they were in April 2020. Netflix is ​​down another seven percent and is now trading at its lowest level since 2018.

Canadian tech companies also sold off, with shares in e-commerce company Shopify, payment processor Lightspeed and BlackBerry all down around 3%.

Cieszynski said selling off tech stocks makes sense because the sector “tends to profit…when investors feel confident and when they’re willing to take risks.”

“At a time when investors are retreating, turning away from risk and becoming more defensive, [technology] tends to underperform,” he said.

Bitcoin dips below $30,000

Bitcoin was no exception as the world’s largest cryptocurrency continued its slide, losing another 5% to trade below US$30,000 for the first time since 2021.

“The cryptocurrency speculative excesses of 2021 could spell a similar fate for risky assets as the dot-com bubble burst in 2000,” Bloomberg Intelligence analyst Mike McGlone said.

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