Stocks tumbled on Tuesday, as Walmart's disappointing profit outlook dragged investors' sentiment. The big-box store's announcement forced investors to reevaluate consumers' strength and its ability to steer the economy away from a potential recession.
Walmart was at the center of attention a day after it cut its quarterly and full-year profit estimates. The retailer said rising inflation is pushing consumers to cut back their spending on general merchandise and instead direct their dollars toward food and fuel. Shares ended the day down 7.6%.
Retailers suffered on Tuesday. The SPDR S&P Retail ETF finished lower by more than 4%. Apparel companies were among the hardest hit. Macy's lost 7.2%, while Nordstrom and Ross shed more than 5% each.
"The consumer is really starting to feel the pressure of inflation, especially the lower-end consumer," said Stephanie Lang, chief investment officer of Homrich Berg. "It's really starting to affect those businesses not only in overall demand – they're really seeing a change in behavior, that consumers are shifting away from some of these higher ticket price items and the brand names."
Shares of Shopify tumbled 14% on news the company will cut 10% of its global workforce. CEO Tobi Lutke said the business has seen a pullback in online spending and that he misjudged how long the pandemic-fueled e-commerce boom would last. Amazon, Block and PayPal, all of which serve online merchants, posted big declines as well.
There were some earnings winners Tuesday, including Coca-Cola, McDonald's, 3M and General Electric. Some investors, including Lang, remain concerned that if the Federal Reserve continues its goal of lowering inflation, it could mean weaker top lines for corporations.
The central bank began its two-day meeting Tuesday. Investors are expecting a three-quarter percentage point hike to be announced Wednesday afternoon.
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