Stocks Down Over 4% Wednesday, Every Sector Red
"US stocks posted the biggest daily drop in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The dollar and Treasuries gained amid a pickup in haven bids.
The selloff sent the S&P 500 down four per cent, the most since June 2020, with the plunge in consumer shares surpassing six per cent. Target Corp. tumbled more than 20 per cent in its worst rout since 1987, after trimming its profit forecast due to a surge in costs. Shares of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft. The Nasdaq 100 fell the most among major benchmarks, dropping more than five per cent as growth-related tech stocks sank. Megacaps Apple Inc. and Amazon.com Inc. also slid over five per cent.
Cisco Systems Inc., the biggest maker of computer-networking equipment, said it expects revenue to decline in the current quarter, hurt by disruptions stemming from Chinese lockdowns and the Ukraine war. The stock dropped as much as 19 per cent in post market trading, the steepest in its history, according to data compiled by Bloomberg.
Treasuries rose across the board, sending the 10- and 30-year Treasury yields down more than 10 basis points." - read more on BNN here
Breaking Thoughts: The backdrop this year of a major war in Europe, record high oil prices, rapidly rising interest rates, ending of Federal reserve stimulus, and ongoing covid lockdown effects is brutalizing markets.
Until some or all of these issues stabilize, both the real business environment and the stock market itself is likely to remain choppy.
Peace -> lowers oil prices -> lowers inflation -> slows down interest rate hikes -> stocks rebound/normalize
However, until such developments investors should be wary of making any large impulsive investments. Instead consider remaining in a dollar cost averaging strategy or waiting out the volatility.
Today's Selloff Spared None: 
Source: Finviz
Target's Costs Skyrocket Due to Inflation - Profits Down 50+%, Stock Falls 25%
"Target Corp. plunged the most since 1987’s Black Monday crash after becoming the second big retailer in two days to trim its profit forecast.
A surge in costs during the first quarter shows little sign of easing, Chief Executive Officer Brian Cornell said. Operating profit will amount to only about 6 per cent of sales this year, 2 percentage points below the previous forecast, Target said Wednesday. And the company’s first-quarter adjusted profit missed the lowest of 23 analyst estimates compiled by Bloomberg.
Target’s worsening outlook echoes the darker panorama at Walmart Inc., which cut its profit forecast on Tuesday and also posted its biggest stock decline since 1987. Target’s fuel and freight costs soared in the first quarter while a shift in consumer spending caused a sharper-than-expected slowdown in apparel and home-goods sales, prompting the company to mark down bloated inventories." - read more on BNN here
Breaking Thoughts: The drop in Target's ($TGT) stock is a striking example of what can happen when a businesses fails to keep its growth up with inflation. Even a "safe" consumer staple company is not immune.
Target increased dollar value sales by 4%, while its blended costs increased 9.4% leading to a 52% decrease in profit. Inflation is effecting energy, transportation, and wage costs faster than Target can increase its own prices.
The price action on its stock today is a stark warning to all investors in this market, as many many other firms are likely to be in a similar position as Target. Tread carefully.
Major Earnings This Week
Tuesday May 17:
Home Depot (HD): Expected Q1 earnings of $3.68 per share
Sea (SE): Expected Q1 earnings of $-1.24 per share
Wednesday May 18:
Cisco (CSCO): Expected Q3 earnings of $0.86 per share
Lowe's (LOW): Expected Q1 earnings of $3.22 per share
Target (TGT): Expected Q1 earnings of $3.07 per share
Thursday May 19:
Lightspeed Commerce (LSPD): Expected Q4 earnings of $-0.19 per share
Canada Goose (GOOS): Expected Q4 earnings of $-0.02 per share
Nio (NIO): Expected Q1 earnings of $-0.86 per share
Palo Alto Networks (PANW): Expected Q3 earnings of $1.68 per share
Major IPOs Expected This Week
None
See you next week!
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The Market News Reel for this week! Get the most important market news & updates for the week ahead! Major headlines, excerpts from news sources are shown above. "Breaking Thoughts" section is purely our opinion.