Dow plunges nearly 700 points as Walmart, Home Depot forecasts disappoint

The Dow plummeted nearly 700 points, while S&P 500 and Nasdaq ended down for the third straight session as Wall Street slumped on Tuesday, with investors interpreting a rebound in US business activity in February to mean interest rates will need to stay higher for longer to control inflation.

The Dow tumbled 697.10 points, or 2.1%, to 33,129.59, the Nasdaq slid 2.5% and the🀅 S&✅P 500 was down 2%.

The S&P Global Purchasing Manufacturer’s index, which reflects business activity in the United States, returned to expansion for the first time in eight months in February. The 50.2 reading, up from 46.8 in January, was buoyed by a robust services sector, according to a survey.

With inflation still far from the Fed’s 2% target, and the economy retaining much of its vigor, money market participants have been revising upwards where they see the Fed fund rates peaking – currently at 5.35% in July and staying near those levels throughout the year.

“Today, the realization is that the Fed is not kidding around about higher for longer, and in fact it might a little bit higher for a little-to-a-lot bit longer,” said Carol Schleif, chief investment officer at BMO Family Office.

Home Depot fell 7.1% to a three-month low🃏 after the No. 1 domestic home improvement chain warned of weakening demand and issued a dour profit for💦ecast for 2023.

Smaller rival Lowe’s fell 5.2% ahead of its results next week.

Walmart, the world’s largest retailer, recovered to end up 0.6% after it forecast full-year earnings below estimates and painted a griಞm 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 gro✨w 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 f🏅or 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 tꦜo 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 all♛ fell more than 2%.