Stocks Waver After Target Cites Inventory Challenges

Barry Adams
07 Jun, 2022
New York City

Stocks were under pressure after Target issued an earnings alert highlighting inventory challenges. 

Futures of the S&P 500 index declined 0.9% to 4,082.50 and the Nasdaq Composite index dropped 1.3% to 12,449.05. 

Target Inc dropped 7.2% to $148.20 after the diversified retailer announced a plan to lower inventories of unwanted products, cancel orders, and markdown excess products. 

The company had warned its inventories problems during the release of latest quarter earnings. 

The swift action to deal with inventories will come at the expense of earnings and operating margins. 

The retailer lowered its operating margin estimate to 2%, lower than the previous estimate of 5.3%, and estimated a second-half operating margin of 6%. 

The company reiterated full-year revenue increase in the low- to mid-single digit and expects to maintain or gain market share in 2022. 

 After the Target announcement, Walmart Inc dropped 2.8% to $124.87. 

Stocks generally closed higher on Monday in a muted trading in the absence of economic news and light earnings calendar. 

Investors are still confronting rising energy prices and elevated inflation pressures and assessing the health of the U.S. economy and consumers. 

Investors are looking ahead to consumer price index data on Friday and hoping that the  inflationary pressures would recede and provide support for market advance. 

 In Europe, market indexes turned lower after German factory orders declined for the third month in a row in April. 

The German statistics office said orders fell 2.7% from March and plunged 6.2% from a year ago on weak foreign demand and harsh China lockdown measures.  

A separate report from the German Machinery Industry Trade Association said machinery orders declined 7% in April from a year ago on slower growth demand from China, supply chain disruptions, and the Ukraine war. 

The orders declined for the second month in a row and domestic orders plunged 17% and orders from foreign markets fell 2%. 

The DAX index declined 1.1% to 14,489.27, the CAC-40 dropped 1.1% to 6,478.20, and the FTSE 100 index fell 0.4% to 7,581.65. 

The U.K. Prime Minister Boris Johnson survived a no-confidence vote after 211 members of parliament of Conservative Party expressed confidence in his premiership. 

Prime Minister Johnson led the party to its largest victory in many decades but with multiple scandals voters discontent is rising and several members of his party are looking for a leadership change.