📉Dow tumbled the most since 2020🍎

Just when we thought peace was upon us, the equity market spooked investors again. It was a nightmare as the Dow fell by over 1000 points while the S&P 500 declined sharply by 4%. Nasdaq, the worst hit, collapsed by 4.7%. The S&P 500 and Dow registered their poorest performance days since 11 June 2020. 

🕹Target is the main target💣

It all started as Target (TGT), the big-box retailer, handsomely missed its target (no pun intended), sending waves of panic across the equity market. The stock fell by a quarter of its value on Wednesday. Investors were able to extrapolate the problems faced by Target to the broader market sentiments. 

Companies may not be able to pass on higher costs entirely to consumers. And when that hurts their profit margin, it is a scream for investors to rush for the exit. Such a problem goes beyond retailers as consumers face constraints too. Target’s problem wasn’t different from Walmart, which reported its earnings on Tuesday, mirroring the same woes. 

Consumers will have to face consumption choices too. They may spend more on food and probably less on discretionary items. Often, such things bring more profit for Target, and the mix of products isn’t delivering expectations. 

💈Uncle Powell hints at possible pain🧸

Market participants were also digesting the comments by Uncle Powell when he hinted at “some pain involved” during the transition to bring down inflation during a conference held by The Wall Street Journal. It wasn’t a melody and diluted the risk-on sentiment. As policy accommodation is removed, there is hardly any stimulus to allow the rally to follow through. Indeed, selling the rally appears to be the dominant strategy these days. 

With the immense selling on Wednesday, the odds of a hard landing increased. When there is doubt, fear and uncertainty about the Fed delivering a true soft-landing, the best bet is on the sideline for incremental accumulation.