Wall Street ends down after Target outlook, Micron supply cut

It was quite a volatile day again as both the Nasdaq and S&P spent the day decidedly in the red and the Dow seesawed back and forth at least a half dozen times between black and red in a 200-point range before settling at a modest 39 point loss.  Target was the trigger with its grim forecast for holiday sales spurring new doubts about consumer spending, doubts that spread to other major retailers like Macy’s, Best Buy and Foot Locker.  Micron also had bad news about a reduction in chip supply and a reduction in capital spending, something that has always seemed strange to me in the midst of a critical chip shortage that the chip companies would be cutting production. 

It did account for the drop in the tech indexes as investors saw this as a good time to take profits off the table.  The good news is that, despite Target, retail sales increased in October, which probably explains the seesaw action.  More good news: Fed Governor Walker, a decided hawk, says he is now “more comfortable with smaller rate increases going forward.”  Geopolitical tensions were eased with the consensus being that the missile fired on Poland was likely a misfire.  With more data expected later in the week, volume remained considerably below average at 10.5 billion. 

Wed  November 16, 2022  4:21 PM

Wall Street ends down after Target outlook, Micron supply cut

By Lewis Krauskopf, Amruta Khandekar and Ankika Biswas

DJ: 33,592.92  +56.22         NAS: 11,358.41  +162.19        S&P: 3,991.73  +34.48     11/15

DJ: 33,553.83  -39.09          NAS: 11,183.66  -174.75         S&P: 3,958.79  -32.94      11/16

Nov 16 (Reuters) - Wall Street's main indexes ended lower on Wednesday as a grim outlook from Target spurred fresh concerns about retailers heading into the crucial holiday season, while semiconductor shares slid after Micron's supply cut.  Shares of Target Corp (TGT.N) tumbled 13.1% after the big-box retailer forecast a surprise drop in holiday-quarter sales.  Retail stocks slumped broadly, including declines of over 8% in shares of Macy's Inc (M.N) and Best Buy Co Inc (BBY.N) and a 7% drop for Foot Locker (FL.N). The S&P 500 consumer discretionary sector (.SPLRCD) shed 1.5%.  Micron Technology (MU.O) shares dropped 6.7% 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) fell 1.4% and the Philadelphia SE Semiconductor index (.SOX) sank 4.3%.

“The biggest sector issue is Target’s earnings and what that means for retail and consumer spending in general. I think that has kind of set the tone for the market," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.  The Micron news “is certainly causing some tech investors to take some of these short term profits off the table because it still appears like the fundamentals are still not great in the tech space,” Carlson said.

The Dow Jones Industrial Average (.DJI) fell 39.09 points, or 0.12%, to 33,553.83, the S&P 500 (.SPX) lost 32.94 points, or 0.83%, to 3,958.79 and the Nasdaq Composite (.IXIC) dropped 174.75 points, or 1.54%, to 11,183.66.  Gains in defensive areas such as utilities (.SPLRCU) and consumer staples (.SPLRCS) helped mitigate the S&P 500's losses. The utilities sector rose 0.9%, while staples gained 0.5%.

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.  Elsewhere in retail, shares of Lowe's (LOW.N) rose 3% after the home improvement company raised its annual profit forecast.

Stocks had staged a big rally over the past month, after softer-than-expected inflation data raised hopes the U.S. 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."  Fed Governor Christopher Waller, an early and outspoken inflation hawk, said he is now "more comfortable" with smaller rate increases going forward after data showed price increases slowing.

Investors also were watching 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 1.96-to-1 ratio; on Nasdaq, a 2.23-to-1 ratio favored decliners.  The S&P 500 posted 3 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 71 new highs and 133 new lows.

About 10.5 billion shares changed hands in U.S. exchanges, compared with the 12.2 billion daily average over the last 20 sessions.