Stocks are lower on Wall Street in afternoon trading Tuesday after Walmart warned that inflation was negatively impacting American consumers' spending power.
The S&P 500 was down 1.3 percent as of 2:42 p.m. Eastern, wiping out modest gains from a day earlier. The Dow Jones Industrial Average was down 247 points, or 0.8 percent, at 31,744 and the Nasdaq Composite slid 2 percent.
Walmart shares dropped 8.3 percent after the retail giant cut its profit outlook for the second quarter and the full year, saying rising prices for food and gas are forcing shoppers to cut back on more profitable discretionary items, particularly clothing.
Walmart's profit warning in the middle of the quarter is rare, and raised worries about how the highest inflation in 40 years is affecting the entire retail sector. Stocks of other major chains fell following Walmart's announcement, made after Wall Street's closing bell on Tuesday. Target dropped 4.2 percent, Macy's slid 6.5 percent and Kohl's fell 8 percent.
Investors have remained deeply concerned about inflation's impact on company profits and how it will affect U.S. consumers. While Americans' finances are relatively strong thanks to savings built up during the pandemic, those nest eggs are being spent on high gas and food prices.
The major indexes are coming off solid gains last week fueled by mostly better-than-expected reports on corporate profits. Falling yields in the bond market also helped, easing the pressure on stocks after expectations for rate hikes by the Federal Reserve propelled yields higher much of this year.
The central bank is expected to announce a rate hike of up to three-quarters of a percentage point on Wednesday, triple the usual amount. The central bank is waging an aggressive campaign to stem four-decade high inflation. The expected hike would put the Fed's benchmark rate in a range of 2.25 percent to 2.5 percent, the highest since 2018.
Bond yields were mixed Tuesday. The two-year Treasury yield, which tends to move with expectations for the Fed, rose to 3.04 percent from 3.02 percent late Monday. The 10-year yield, which influences mortgage rates, fell to 2.79% from 2.82 percent.
Technology stocks, retailers and communication companies were among the biggest drags on the benchmark S&P 500 index. Microsoft was down 3.5%, Amazon slid 5.3% and Facebook owner Meta Platforms dropped 4.5 percent.
The losses easily outweighed gains by health care and utilities stocks. Small company stocks also fell, sending the Russell 2000 0.6 percent lower.
Investors were eying the latest batch of corporate earnings reports.
Shares of automaker General Motors fell 3.1 percent after the company said its second-quarter profit fell 40 percent from a year ago, as computer chip and parts shortages hobbled factory output and drove the company's U.S. sales down more than 15 percent.
The Detroit automaker earned $1.67 billion from April through June, well below the $2.79 billion it made a year earlier. GM couldn't deliver 95,000 vehicles during the quarter because it lacked parts.
Shopify slumped 15.3 percent after the Canadian e-commerce company said it is cutting 10 percent of its staff, or about 1,000 employees, as it reckons with an unexpected sales downturn after pandemic-fueled growth.
Tech heavyweights Alphabet and Microsoft report their results after the closing bell, while Meta, Apple and Amazon report later in the week.