NEW YORK (Washington Insider Magazine) – Investors are concerned that soaring inflation is now catching up with people, causing another tumultuous day on Wall Street.
The Dow Jones Industrial Average fell 236 points after plummeting over 1,100 points the day before, as the S&P 500 edged further to bear market conditions, which is defined as a 20% drop from a recent high.
“It’s critical to remember that the market is not the economy,” National Securities’ chief market strategist Art Hogan told ABC News.
Retail behemoths Kohl’s (KSS), Walmart (WMT), and Target (TGT) all reported lower-than-expected profits this week, triggering a massive market sell-off (TGT). Each company lowered its profit forecast for the year, citing increasing labor and transportation costs as a factor.
Despite skyrocketing prices, consumers continue to spend. Retail sales increased 0.9 percent in April, almost in line with expectations, but consumers are beginning to change their purchasing patterns.
CEO Doug McMillon stated on Walmart’s earnings call that buyers are shifting from discretionary expenditures to lower-margin products like food and other home essentials.
Household finances continue to be impacted by record-high fuel costs. Gas prices have now surpassed $4 per gallon throughout all 50 states, and economists predict that they will continue to rise. The hectic summer driving season, according to JPMorgan Chase, could boost the national average above $6 per gallon by August.
Economists predict increasing gas costs to fuel inflation, which is already on a 40-year high due to an unique storm of variables like underemployment, supply chain disturbances, robust consumer demand, COVID induced lockdowns in China, and finally the Ukraine conflict.
The Federal Reserve is responding by hiking interest rates rapidly in order to reduce customer demands and rising prices. Investors are concerned that higher rates may limit growth to the point that the economy will enter a recession.
According to a news release, 68% of CEOs polled by The Conference Board currently forecast the Fed’s assault on rising prices to precipitate a recession in the next year.