Wall Street appears to be heading for another tough day

NEW YORK (AP) — Wall Street headed for more losses at the open after yesterday’s rout amid still-high inflation and its potential effect on corporate earnings and consumer spending.

Futures for the S&P 500 and the Dow Jones Industrial Average slid 0.9% before the bell on Thursday.

Stocks in Europe and Asia fell sharply following the fall in US markets.

The German DAX was down 1.6% at midday, while the CAC 40 in Paris fell 1.7% and the British FTSE 100 lost 2.1%.

On Wednesday, the Dow sank more than 1,100 points, or 3.6%. The S&P 500 saw its biggest drop in nearly two years, losing 4%, and the tech-heavy Nasdaq fell 4.7%.

The benchmark is now down more than 18% from its peak at the start of the year. This is just below the 20% drop that is considered a bear market.

“Sentiment in the market is very negative as traders and investors are widely concerned about an economic slowdown and runaway inflation,” Avatrade’s Naeem Aslam said.

Rising interest rates, high inflation, war in Ukraine and a slowing Chinese economy have caused investors to reconsider the prices they are willing to pay for a wide range of stocks, from tech companies high-flying to traditional automakers.

The last bear market happened just two years ago, but it would still be a first for investors who started trading on their phones during the pandemic. For years, thanks in large part to the extraordinary actions of the Federal Reserve, stocks often seemed to go in one direction: up. Now, the familiar rallying cry to “buy the dip” after every market swing gives way to the fear that the dip will turn into a crater.

The Federal Reserve is trying to soften the impact of the highest inflation in four decades by raising interest rates. Many other central banks are on the same path. But the Bank of Japan stuck to its low interest rate policy and the gap between the benchmark rates of the world’s largest and third largest economy pushed the value of the dollar higher against the yen. Japanese.

Japan reported a trade deficit in April, as its imports soared 28%. This change reflects soaring energy costs amid the war in Ukraine and a weakening of the yen against the US dollar.

The Nikkei 225 in Tokyo fell 1.9% to 26,402.84 and the Hang Seng in Hong Kong fell 2.5% to 20,120.60. In South Korea, the Kospi fell 1.3% to 2,592.34, while Australia’s S&P/ASX 200 fell 1.7% to 7,064.50.

The Shanghai Composite Index reversed earlier losses, gaining 0.4% to 3,096.96.

On Wednesday, retailer Target lost a quarter of its value after reporting earnings well below analysts’ forecasts. Inflation, particularly for transportation costs, drove its operating margin for the first quarter to 5.3%. He expected 8% or more.

The company has warned that its freight costs this year will be $1 billion higher than it estimated just three months ago.

The report comes a day after Walmart said its profits were hit by rising costs. The nation’s largest retailer fell 6.8%, adding to its losses on Tuesday.

Target and Walmart have each provided anecdotal evidence that inflation is weighing on consumers, saying they have held back buying big ticket items and shifted from national brands to less expensive store brands.

The weak reports fueled concerns that the stubborn rise in inflation is putting greater pressure on a wide range of companies and could further squeeze their profits.

Other major retailers also racked up heavy losses.

The data is not entirely consistent. On Tuesday, the market applauded an encouraging report from the Commerce Department that showed retail sales rose in April, driven by increased sales of cars, electronics and increased restaurant spending.

Investors fear the Fed could trigger a recession if it raises interest rates too high or too quickly. Concerns persist over global growth as Russia’s invasion of Ukraine puts further pressure on oil and food prices, while lockdowns in China to stem COVID-19 cases worsen supply chain issues.

In other exchanges, the benchmark U.S. crude oil fell $1.27 to $108.32 a barrel in electronic trading on the New York Mercantile Exchange. It fell $2.81 to $109.59 on Wednesday.

Brent crude, the price basis for international trade, slipped 71 cents to $108.40 a barrel.

The dollar fell to 127.92 Japanese yen from 128.20 yen on Wednesday night. The Euro strengthened to $1.0514 from $1.0464.

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