Walmart cut its profit forecast on Tuesday morning, sending stocks in the retail sector plunging after hours.
The futures of Dow Jones Industrial Average was declined by 120 points, or 0.38%. Futures on the S&P 500 and Nasdaq 100 fell 0.3% and 0.39 percent, respectively.
Following Walmart’s late Monday announcement that it has cut its quarterly and full-year profit forecast due to rising food inflation, investors have pondered the implications for other retail stocks. A big-box retailer says higher prices are leading consumers to cut back on the amount they spend on goods, especially apparel.
With other shops following its lead, Walmart’s share price fell by about 9% in extended session. Target’s decline was 5%, while Amazon’s was 4%. Macy’s and Dollar General both experienced 3% declines, while Costco experienced a 2% fall.
“Clearly, they have the wrong stuff, and they have to sell it more aggressively to clear that out, which looks like it’s going to take a pretty dramatic hit as a result of that,” as quoted on CNBC’s “Closing Bell: Overtime” by Jeremy Bryan, senior portfolio manager at Gradient Investments.
“The question is, how does this relate to the rest of the discretionary space?” Bryan added.
During Monday’s session, stocks moved in a narrow range, with the S&P 500 gaining 0.1%. According to the Dow Jones Industrial Average, it rose 90.75 points, or 0.3%. With a 0.4% decline, the tech-heavy Nasdaq Composite lagged. The major averages are all looking forward to having their best month of the year.
As the week unfolds, investors will be focused on a glut of mega-cap tech earnings and economic data, particularly on the outcome of the Federal Reserve meeting, which will influence Wall Street’s outlook for the rest of the year.
“I think that there’s going to be a bifurcated market,” Avery Sheffield of VantageRock Capital stated at “Closing Bell: Overtime” on CNBC. “I think the bottom might be in certain stocks, but nowhere in others. So this actually could be one of the most dynamic earnings seasons we’ve seen in a long time.”
Tuesday marks the start of the Federal Reserve’s two-day policy meeting. It is widely expected that a three-quarter percentage point increase will occur.
Before the bell on Tuesday, earnings reports from Coca-Cola, McDonald’s, and General Motors are scheduled. After the bell, reports from UPS, Enphase Energy, Microsoft, Chipotle Mexican Grill, and Alphabet will be given.
The most recent Case-Shiller Home Price Index report is anticipated by traders at 9 a.m. ET on the economic front. Both the new home sales data and the consumer confidence report are scheduled to be released at 10 a.m. ET.