S&P 500 Drops 1.2% to 3,920s, Walmart Slumps 8% on Surprise Profit Warning

Wall Street declines led by retail stocks following Walmart profit warning.

Tuesday's major US market indices fell as a result of Walmart's unexpected profit warnings, which had a negative impact on retail stocks like Target and Amazon, and as dangers of a worldwide recession were underlined by a new European gas rationing agreement and weak consumer confidence statistics in the US. The S&P 500 index was last trading at 3,920, down 1.2 percent, and is currently finding support near its 50-Day Moving Average.

Unsurprisingly, the S&P 500 Consumer Discretionary GICS sector declined 3.0 percent, making it the underperformer. In its profit warnings, Walmart cautioned that rising US inflation is hurting consumers' desire to spend on discretionary items and chilling the sector weeks before it is slated to announce Q2 earnings. As AMZN traders prepare for the company's earnings announcement later this week, news that Amazon wants to increase the price of its Prime subscription by as much as 43% in Europe failed to lift its stock price.

Major tech companies Alphabet and Microsoft, both of which are set to release earnings after Tuesday's closing, were also hurt by the worries. The Nasdaq 100 index has lost more than 4.0 percent since last week's multi-week peaks and was last trading down 2.0 percent near the 12,100 level. It is now targeting a test of its 21 and 50DMAs, which are located on either side of the 12,000 mark.

KO, MCD Strength in Coco Cola and McDonalds following their respective impressive earnings reports prior to the market's opening helped limit losses for the Dow Jones Industrial Average, which was last down x percent in the 31800s. The former increased its prediction for full-year 2022 growth to 12-13 percent from 7-8 percent after exceeding forecasts on both the top and bottom lines, while it also cautioned that commodity price inflation is a major negative. In contrast, McDonald's experienced stronger same-store sales growth than anticipated despite price increases, though the company's CEO cautioned that the situation remains difficult.

Other major earnings reports included General Motors missing analyst projections and UPS outperforming forecasts thanks to higher courier prices. The US Securities & Exchange Commission is looking into the US-based cryptocurrency exchange Coinbase Global on the possibility that it listed unregistered securities, which has hurt the share price of Coinbase Global.

Downbeat Macro Tone Pre-Fed

US long-term rates have subsequently mostly recovered from their previous decline, but the global macro trade environment is still quite defensive. After the EU's energy ministers agreed on a somewhat watered-down plan to reduce gas consumption between now and next March, while Russia further lowered Nord Stream 1 flows to just 20% of capacity, yields in Europe also fell on Tuesday. Italian and German stocks also suffered.

Although gas rationing has not yet occurred in the EU, recent data shows that the region's economic activity is already being stifled by exorbitant energy prices and a great deal of uncertainty, and markets appear to be heading toward pricing in a downturn. Although conditions aren't quite as terrible in the US, markets appear to be increasingly bracing for an impending recession, which was highlighted as a growing concern by a further decline in US Consumer Confidence data on Tuesday.

The Fed is likely to start reducing its view for tightening in 2023 due to indicators that inflation has likely peaked and the economy is faltering, according to bond and money market signals. Ahead of Fed Chair Jerome Powell's post-meeting news conference on Wednesday, traders will be watching for any such cues. For a second time in a row, the Fed is predicted to raise interest rates by 75 basis points, effectively ending its stimulus program from the epidemic era.