Wall Street’s main indexes fell on Wednesday as a grim outlook from Target spurred fresh concerns for retailers heading into the crucial holiday season, while semiconductor shares slumped broadly after Micron’s supply cut.
Retail stocks slumped broadly, including steep declines in shares of Macy’s Inc (M.N), Best Buy Co Inc (BBY.N) and Foot Locker (FL.N). The S&P 500 consumer discretionary sector (.SPLRCD) dropped 1.1%.
Micron Technology (MU.O) shares dropped over 7% after the company said it would reduce memory chip supply and make more cuts to its capital spending plan. The S&P 500 information technology sector (.SPLRCT) dropped 1.3%, while the Philadelphia SE Semiconductor index (.SOX) sank over 4%.
“There are two things weighing on market sentiment; you’re seeing softer demand in two sectors with Target in the retail sector and Micron with the chips,” said Dennis Dick, market structure analyst and trader at Triple D Trading.
The Dow Jones Industrial Average (.DJI) fell 46.76 points, or 0.14%, to 33,546.16, the S&P 500 (.SPX) lost 29.2 points, or 0.73%, to 3,962.53 and the Nasdaq Composite (.IXIC) dropped 146.85 points, or 1.29%, to 11,211.56.
Gains in defensive sectors such as utilities and consumer staples helped mitigate the S&P 500’s losses.
Despite the sales warning from Target, data showed U.S. retail sales increased more than expected in October as households stepped up purchases of motor vehicles, suggesting consumer spending picked up early in the fourth quarter.
Stocks had staged a big rally over the past month, after softer-than-expected inflation data raised hopes the Federal Reserve could get less aggressive with interest rate hikes.
“The market had seen a good run-up from those lows and had continued to move higher,” said George Catrambone, head of Americas trading at DWS Group. “The market has a lot to think about and digest as we get into year end.”
San Francisco Federal Reserve Bank President Mary Daly said the U.S. central bank’s policy rate could end up in the 4.75%-5.25% range, high enough to squeeze inflation from the economy but not so high as to trigger a severe recession.
Investors also had their eyes on geopolitical tensions. A missile that hit Poland was probably a stray fired by Ukraine’s air defenses and not a Russian strike, Poland and NATO said, easing global concern that the war in Ukraine could spill across the border.
Declining issues outnumbered advancing ones on the NYSE by a 1.94-to-1 ratio; on Nasdaq, a 2.31-to-1 ratio favored decliners.
The S&P 500 posted 3 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 54 new highs and 110 new lows.