Stock futures fall as retail sales beat, earnings targets miss

U.S. stock futures fell Wednesday morning as Wall Street weighed in retail leader’s profit warning Target versus government retail sales data which showed robust consumer spending ahead of the key holiday period.

Futures contracts linked to the S&P 500 (^GSPC) and Dow Jones Industrial Average (^ DJI) hovered below the fixed line, while contracts on the tech-heavy Nasdaq Composite (^IXIC) decreased by 0.2%.

The Commerce Department said Wednesday retail sales jumped 1.3% in October as Americans shelled out for food, gasoline and big-ticket items last month despite inflationary pressures. Economists polled by Bloomberg had expected an overall increase of 1.0% after activity was flat in the previous month.

A strong impression can derail the uptrend of the marketwith investors likely to interpret robust spending as a sign to Federal Reserve policymakers that aggressive rate hikes may continue.

All eyes were on target (TGT) as it plunged 15% in premarket trading on the back of a third-quarter earnings report that saw wide margin and low guidance for the holiday quarter. The retailer has been pressured by a slowdown in consumer spending on discretionary goods and said the looting of stores reduced its gross profit margin by $400 million so far this year.

“During the final weeks of the quarter, sales and earnings trends moderated significantly as customer buying behavior was increasingly impacted by inflation, rising interest rates and uncertainty. economic,” Target Chairman and CEO Brian Cornell said in the earnings release. third quarter earnings performance well below our expectations.”

In other pockets of the market, the US dollar lost ground while oil gained slightly as geopolitical jitters subsided after a Russian-made missile hits Poland on Tuesday and rekindled fears of an escalation of Russia’s war in Ukraine. President Joe Biden met with NATO allies on Wednesday at the G20 meeting in Bali, Indonesia and defused concerns while affirming US officials will support Poland as it investigates whether the missile was fired from Russia.

Back home, stocks have held up so far this week after a softer CPI reading on Thursday spurred an outsized relief rally. The October Producer Price Index (PPI), another key indicator of inflation, revived this optimism in yesterday’s session, as well as comments from members of the Federal Reserve in recent days suggesting a possible slowdown in rate hikes.

“We all have to keep in mind that Fedspeak is pretty disparate at the moment, and you can have a hawkish or dovish view depending on which official you ask,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office. in a note. “The market is also digesting how much inflation is affecting the consumer, with key retail revenues beating expectations and retail sales coming in.”

WASHINGTON, DC – MAY 23: (L-R) Federal Reserve Vice Chairman Lael Brainard shakes hands with Jerome Powell on May 23, 2022 in Washington, DC. (Photo by Drew Angerer/Getty Images)

On the earnings front, non-Target retail earnings have so far exceeded analysts’ estimates.

Lowe’s hardware store (DOWN) beat analyst forecasts on Wednesday. Shares rose nearly 2% ahead of the open, even as the company cut the top of its full-year revenue forecast.

Walmart Megastore (WMT) benefit from more value spend by customers pinched by inflation and a “significant” improvement in its inventory glut, while higher prices helped offset fewer transactions at Home Depot (HD).

Another set of industry peers are still on deck to report, with results from TJX Companies (TJX) and Victoria’s Secret (VSCO) which is due out on Wednesday. NVIDIA (NVDA) is another major headliner on the revenue ledger.

Digital World Acquisition Corp. (DWAC), the special-purpose acquisition company set to merge with Donald Trump’s media company, extended the run this week after the former president officially entered the 2024 presidential race Tuesday. The shares rose 5% in premarket trading.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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