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The American consumer, crushed by inflation and rising gas prices and rents, is beginning to watch, and perhaps cringe. That is basically what is revealed by the poor results of the big distribution companies, such as Walmart and Target, whose disappointing performances caused a mini-earthquake on Wall Street on Wednesday, May 18. The S&P 500 index lost more than 4% at the end of this session -it is down 17% since the beginning of the year-, while the Nasdaq, rich in technology stocks, fell 4.73% -down 27% from the oneAhem January).
The operators had remained deaf on Tuesday when the president of the US Federal Reserve (Fed, central bank) Jerome Powell had announced that he would raise the rates of the monetary institution whenever necessary to kill inflation; they fell back to earth on Wednesday as the American consumer showed by his behavior that the country was in danger of sinking into recession.
On Wednesday, in a single session, the US discount giant Target lost 25% of its stock value, something unprecedented since the 1987 crash. The firm, which had just published results below expectations, mainly indicated that he preferred to absorb the rise. in the costs generated by the bottlenecks, the rebound in the prices of raw materials, energy and transport -more than 1,000 million dollars (950 million euros) compared to forecasts- and the increase in wages, instead of passing them on to consumers. “We do not anticipate the rapid changes we have seen in the last sixty days”CEO Brian Cornell said.
The clear explanation is found in Walmart, the largest employer and supermarket giant in the United States, which lost 18% of its stock value in two days: consumers no longer want to pay; more of them have stopped buying new clothes and other merchandise due to rising gasoline and groceries, Walmart told CNBC. Some have turned to cheaper or retailer brands and opted for smaller quantity items, such as half milk jugs.
Negative growth in the first quarter
Added to this is a shift towards services, pointed out by Target: Americans are buying fewer durable goods, such as televisions or exercise bikes, and are reallocating their spending to services, particularly tourism. DIY or housekeeping specialty stores are holding out, while Americans are building single-family homes to escape pandemic overcrowding. But overall, all retail stocks (BestBuy, Dollar General, Costco, Macy’s) lost more than 10% on Wednesday.