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Stock Markets Fall Amid Concerns Over Rising Cost of Living

Stock Markets Fall Amid Concerns Over Rising Cost of Living
Source: BBC

Fears that increasing costs may cause the global economy to stagnate have caused stock markets in Asia and the United States to decline.

After disappointing earnings announcements from some of the country’s largest retailers, US stocks dropped the most in a single day since 2020.

Target claimed earnings had almost halved year over year due to unexpectedly increased fuel and freight costs.

That followed a similarly gloomy announcement from Walmart earlier in the day.

In Asia afternoon trade, Japan’s Nikkei index was down 1.8 percent, while Hong Kong’s Hang Seng was down 2.3 percent.

The Dow Jones Industrial Average fell 3.5 percent and the S&P 500 index, which monitors shares of a wide range of America’s largest corporations, fell more than 4%.

The Nasdaq, which is dominated by technology, dropped 4.7 percent. The losses came on top of weeks of losses on US financial markets.

“After seeing Target, many are scared that more earnings [estimates] may have to be lowered.” said Thomas Hayes, chairman of New York-based Great Hill Capital.

“Consumer confidence is at multi-year lows and is inextricably linked to inflation. People are searching for evidence of inflation slowing, and Target provided none today.”

Target’s stock dropped 25% after the announcement, the greatest drop in more than three decades.

Target and Walmart’s releases were carefully monitored for indicators of how consumer spending in the world’s largest economy is holding up as inflation reached 40-year highs.

Although official US government data recently showed retail sales increased by a robust 0.9 percent in April, several analysts have warned that the figures, which are not adjusted for inflation, may understate signals of slowing – especially for lower-income people.

Amazon announced a surprising decline in online sales in the first three months of this year earlier this year.

In the three months leading up to May, Target stated sales at shops open for at least a year were up more than 3% compared to 2021. However, CEOs claim that when costs rise, buyers are spending more on necessities and less on luxury products like televisions and clothing.

It told investors that gasoline and freight costs would be $1 billion more than projected this year. According to the company, supply chain challenges will not be relieved until at least 2023.