U.S. stocks fell in a lackluster session Wednesday as Wall Street weighed an earnings warning from retail bellwether Target against government data on retail sales that showed robust consumer spending ahead of the key holiday season.
The S&P 500 (^GSPC) shed 0.8%, while the Dow Jones Industrial Average (^DJI) was off by about 0.1%. The technology-tracking Nasdaq Composite (^IXIC) tumbled 1.5%.
The Commerce Department said Wednesday retail sales jumped 1.3% in October as Americans shelled out for food, gas, and big-ticket items last month despite inflationary pressures. Economists surveyed by Bloomberg expected a headline increase of 1.0% after activity was flat during the prior month.
On the corporate front, all eyes were on Target (TGT) as it plunged 13% following a third-quarter earnings report that came in off by a wide margin and weak guidance for the holiday quarter. The retailer was pressured by a slowdown in consumer spending on discretionary merchandise and said store looting reduced its gross profit margin by $400 million so far this year.
“In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests’ shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty," Target Chairman and CEO Brian Cornell said in the earnings release. "This resulted in a third-quarter profit performance well below our expectations."
In other pockets of the market, the U.S. dollar lost ground while oil gained slightly as geopolitical jitters eased after a Russian-made missile struck Poland Tuesday and reignited fears over an escalation of Russia's war in Ukraine. President Joe Biden met with NATO allies Wednesday at the G20 gathering in Bali, Indonesia, and defused concerns while asserting U.S. officials will support Poland as it investigates whether the missile was fired from Russia.
Back in domestic territory, equities have so far held up this week after a lighter CPI reading Thursday spurred an outsized relief rally. October’s Producer Price Index (PPI), another key inflation gauge, rekindled that optimism in Tuesday's session, along with comments from Federal Reserve members in recent days that suggested a possible slowdown in rate hiking.
“We should all keep in mind that Fedspeak is pretty disparate at the moment, and you can get a hawkish or dovish point of view depending on which official you ask,” Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office, said in a note. “The market is also digesting just how much inflation is affecting the consumer, with key retail earnings beating expectations and retail sales."
Elsewhere on earnings, retail quarters other than Target's have so far topped analyst estimates.
Home improvement store Lowe’s (LOW) beat analyst forecasts Wednesday. Shares rose 3% at the open even as the company trimmed the top end of its full-year revenue guidance.
Megastore Walmart (WMT) benefited from more value spending by customers pinched by inflation and a "significant” improvement in its inventory glut, while higher prices helped offset fewer transactions at the Home Depot (HD). And TJ Maxx parent TJX Companies (TJX) lifted its sales forecast after reporting strong third-quarter demand.
Investors shift their focus to Nvidia (NVDA), another major headliner on the earnings docket reporting after the bell.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc