Dow plunges as Walmart, Home Depot forecasts disappoint

Wall Street’s main stock indexes fell more than 1% on Tuesday as gloomy forecasts from retailers Home Depot and Walmart added to worries that a sharp rise in interest rates and high inflation were taking a toll on the US economy.

In morning trading, the Dow tumbled 488 points, or 1.4%, at 33,338, the Nasdaq slid 1.8% and the S&P 500 was down 1.5%.

Home Depot fell 5.4% to a three-month low after the No. 1 domestic home improvement chain warned of weakening demand and issued a dour profit forecast for 2023.

Smaller rival Lowe’s fell 4.8% ahead of its results next week.

Walmart, the world’s largest retailer, shed 0.2% after it forecast full-year earnings below estimates and painted a grim picture of hotter-than-expected food inflation squeezing profit margins.

“Walmart is a bellwether for how the consumer is doing and the fact is that they envision that the consumer may be getting to that point of having to pull back,” said Art Hogan, chief market strategist at B Riley Wealth.

Analysts are expecting earnings of S&P 500 companies to grow by 1.6% in 2023, compared to a 4.4% growth estimated at the start of the year, as per Refinitiv data.

Stocks have added to their gains so far this year after its worst annual showing in more than a decade in 2022, as investors hoped the central bank’s rate-hike cycle was nearing its end.

However, recent economic data has pointed to a resilient economy with inflation far from the Fed’s 2% target, raising bets for two or three more 25 basis point increases.

The central bank has got more wiggle room to raise rates as US business activity unexpectedly rebounded in February, according to a survey, underpinned by a robust services sector.

Money market participants see the benchmark level peaking to a 5.3% in July, and staying near those levels throughout the year.

Adding to the glum mood, yield on the US benchmark 10-year Treasury note edged higher, pressuring rate-sensitive growth stocks.

Apple, Amazon, Microsoft and Google-parent Alphabet fell between 1.6% and 1.6%. 

In a bright spot, Meta Platforms added 0.7% after the Facebook parent said it is testing a monthly subscription service called Meta Verified, which will let users verify their accounts using a government ID and get a blue badge.