U.S. stocks moved lower Wednesday, while the dollar rose to a four-and-a-half year high against the yen, as investors expressed concern that solid consumer spending will continue to power inflation prospects heading into the final months of the year.
A stronger-than-expected reading for October retail sales, alongside robust October-quarter profits for retail giants Walmart (WMT) - Get Walmart Inc. Report and Home Depot (HD) - Get Home Depot, Inc. (HD) Report, has re-ignited inflation concerns and lifted Treasury bond yields and rate hike prospects.
The CME Group's FedWatch tool is now pricing in a 68.7% chance of a rate hike by June of next year, notably earlier than prior forecasts, while benchmark 10-year Treasury note yields are trading at at a three-week high of 1.63%.
- 10:50 AM Eastern Time: Visa Weighs on Dow, Target Slumps, Lowe's Leaps
Third quarter updates Wednesday from Target (TGT) - Get Target Corporation Report and Lowe's (LOW) - Get Lowe's Companies, Inc. (LOW) Report also added to inflation concerns, with profit margins for both retailers getting squeezed on higher input and labor costs.
That's putting pressure on U.S. stocks heading into the start of the Wednesday session, with investors also looking to softer October housing starts and after-the-bell earnings chipmaker Nvidia (NVDA) - Get NVIDIA Corporation Report to round out the day.
"While we remain structurally bullish on stocks, we do anticipate a push and pull of market dynamics into year-end given inflation concerns, supply chain pressures, labor shortages, and fiscal uncertainty," said Andrea Bevis, senior vice president at UBS Private Wealth Management in Boston.
"Even with elevated inflation, we remain optimistic about the consumer, given healthy household balance sheets," she added. "While the holiday season in November and December has the potential to provide a further consumer spending boost, we remain aware of the limited stamina consumers have to continue to pay elevated prices for goods over the long-run."
The Dow Jones Industrial Average was marked 150 points lower in the opening hours of trading, with Visa V clipping 75 points from the average, while the S&P 500 fell 7 points. The tech-focused Nasdaq Composite dipped 10 points as benchmark 10-year Treasury note yields edged to 1.632% in overnight trading.
Visa fell fell 5.5% after retail giant Amazon (AMZN) - Get Amazon.com, Inc. Report said it would no longer accept credit cards issued in the United Kingdom due to the high fees it charges on payments.
Starting in mid-January of next year, Amazon.co.uk will no longer allow U.K.-issued Visa cards as a form of payment, although debit cards will still be permitted, the company said. Amazon's decision echoes a similar dispute with U.S.-based grocery group Kroger (KR) - Get Kroger Co. (KR) Report in 2019.
Target shares were active in early trading, too, falling 5% after the retailer posted stronger-than-expected third quarter earnings, but made only modest changes to its full-year outlook for same-store sales amid ongoing pressures on profit margins.
Lowe's Companies shares, however, moved 3.3% higher after a better-than-expected third quarter update that included solid same-store sales and a full-year sales target boost to $95 billion.
Pfizer (PFE) - Get Pfizer Inc. Report shares, meanwhile, edged 0.8% higher after saying its its longtime CFO Frank D’Amelio will retire and filing a formal application for Emergency Use Approval of its promising COVID antiviral treatment.
Lucid Group (LCID) - Get Lucid Motors Report shares edged 0.8% lower, although the luxury electric vehicle maker’s market value is still near $90 billion – more than Ford (F) - Get Ford Motor Company Report, and right behind General Motors (GM) - Get General Motors Company (GM) Report.
Tesla (TSLA) - Get Tesla Inc Report shares nudged 1.1% higher amid another set of Securities & Exchange Commission filings showing founder and CEO Elon Musk offloading another batch of shares in the clean-energy carmaker.
Away from equities, global oil prices edged lower, pushed down by a surging U.S. dollar -- which traded a four-and-a-half year high of 114.92 against the yen and a four-month high against its global peers -- and data from the American Petroleum Institute showing only a modest 655,000 barrel increase in domestic crude supplies.
WTI futures contracts for December delivery were marked 47 cents lower at $80.29 per barrel while Brent contracts for January, the global benchmark, slipped 37 cents to $82.06 per barrel.
In overseas markets, Europe's Stoxx 600 rose 0.13% by mid-day trading in Frankfurt while the Asia region-wide MSCI ex-Japan index was marked 0.38% lower on the session. In Tokyo, the Nikkei 225 closed 0.4% lower at 29,688.33 points.