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Why Are Stocks Down Today?


  • Investors are asking why are stocks down today as markets plunge more than 3%
  • Big earnings misses from Target (NYSE:TGT) and Walmart (NYSE:WMT) appear to be the key drivers of today’s decline
  • Inflation is starting to appear in corporate earnings, shaking investor confidence
A traffic light flashes green in front of Wall Street.
Source: Shutterstock

It’s gone from bad to outright ugly in the markets today. All major indices are down significantly, with the DowS&P 500 and Nasdaq each trading more than 3% lower. Looking at the market heat map, it’s almost entirely red, outside of a few winners. This has led to an obvious question from many investors: Why are stocks down today?

As always, this is a difficult question to answer outright. Most investors are aware that this is not necessarily a bullish macroeconomic environment for stocks. Indeed, Wall Street is viewing risk assets as increasingly dangerous as interest rates and inflation rise.

However, there are other key catalysts investors are watching today. It’s earnings season, which always brings about volatility. And given how high many of the valuations in the market are, investors have reason to sell any company that’s not blowing out earnings.

Why Are Stocks Down Today?

Much of today’s downside move appears tied to big earnings misses from retailers Target (NYSE:TGT) and Walmart (NYSE:WMT).

Weaker earnings relative to consensus estimates is not a good thing. Target is down nearly 27% while Walmart is down more than 7%. For Target, this is the largest single-day move to the downside in more than two decades.

What’s interesting about these numbers is that margin compression appears to be real. These retailers are seeing store traffic numbers consistent with what may otherwise represent growth. However, it’s becoming increasingly clear that input inflation isn’t being put on the consumer, yet. This has led to significant declines in profit margins, one of the key factors investors consider with such stocks.

Accordingly, the market appears to be pricing in poor earnings for all sorts of other retail stocks. This decline is broad-based, and the wreckage is growing. If earnings estimates come down alongside valuation compression, we could be due for rough waters ahead.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/why-are-stocks-down-today-target-walmart-inflation/.

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