NAfter the significant losses on Wall Street, the Dax started trading weaker on Thursday. The leading German index fell by up to 2 percent in early trading. The weakest values in the Dax in the first few minutes included HelloFresh and Adidas with discounts of 3.4 and 2.5 percent. In the M-Dax, Commerzbank was one of the few stocks that were up. The titles gained a good one percent. They had already gone out of trading more firmly on Wednesday because a report by the “Financial Times” had revived old speculation about the takeover of Commerzbank and Unicredit.
Prices on the American stock exchanges had previously fallen sharply. Investors are speculating that the Federal Reserve will raise interest rates more drastically. “Buzzwords like recession and slump in profits are making the rounds on the trading floor,” said Thomas Altmann from QC Partners. “Fewer and fewer believe that the Fed will manage a soft landing of the US economy. Instead, concerns are growing about the consequences of interest rate hikes.” At the end of trading, the leading US index, the Dow Jones Industrial, fell by 3.57 percent to 31,490.07 points. The broader S&P 500 fell 4.04 percent to 3923.68 points – its highest daily loss since June 2020.
US retailers shock investors
Things looked even worse for the tech-heavy Nasdaq 100 on Wednesday, which fell 5.06 percent to 11,928.31 points, slipping back below the round 12,000 mark. The lowest level since November 2020, which was reached in the previous week, came closer again. Highly indebted technology companies suffer particularly from rising interest rates.
In addition, weak signals came from the US construction industry in the middle of the week. The number of new houses started and the number of building permits declined. The construction industry is also having problems with rising mortgage interest rates and increased material costs due to delivery bottlenecks.
US retailers are currently shocking investors by cutting their forecasts. After Walmart the day before, it was Target’s turn on Wednesday. Its paper fell to its lowest level since November 2020. The market value fell by a quarter. The retailer pointed to the significant increase in costs in the first quarter, which means that it is likely to be less profitable this year than initially targeted. Analyst Steven Shemes from the Canadian bank RBC wrote that he had expected challenges for Target in the first quarter, but not with cost pressure on this scale or with a reduction in the forecast.
Target’s news dragged the entire industry down. Walmart shares lost another 6.8 percent after losing more than 11 percent the previous day. Walgreens Boots Alliance fell 8.4 percent. Costco, Kohl’s, Best Buy, Dollar General, Dollar Tree and Macy’s all posted double-digit percentage losses.
Retailers’ profit margins have come under pressure from high inflation and rising transportation and labor costs, explained analyst Konstantin Oldenburger of broker CMC Markets. “Inflation is forcing consumers to spend more money on groceries, which means they have less available products that are more profitable for companies due to higher margins,” the expert wrote.
Tesla stock falls 6.8 percent
The hardware store group Lowe’s also disappointed investors on Wednesday with its like-for-like sales development. Shares fell 5.3 percent. In contrast to Lowe’s, the competitor Home Depot had given a positive exclamation mark the day before. In the middle of the week, however, Home Depot stocks lost as much as Lowe’s.
A bright spot in the sold-out retail sector was TJX, which gained 7.1 percent after quarterly figures. According to market participants, investors have thus rewarded the stronger margin development compared to Walmart and Target.
Electric car maker Tesla was removed from the S&P 500 ESG stock index for sustainable investments – much to the displeasure of company boss Elon Musk. ESG stands for Environmental, Social and Governance. This abbreviation is used by the financial industry to offer financial investments in which criteria such as the environment, social issues and good corporate governance are to be given greater consideration. Tesla shares fell 6.8 percent on Wednesday.
The euro fell below $1.05. After the close of trading in New York, $1.0464 was paid for it. The European Central Bank (ECB) had previously set the reference rate at 1.0523 (Tuesday: 1.0541) US dollars, so the dollar had cost 0.9503 (0.9487) euros.
On the bond market, prices turned positive in view of the bad mood on the stock market and the flight of investors to investments that were perceived as safe. The futures contract for ten-year Treasuries (T-Note Future) recently rose by 0.51 percent to 119.47 points. In return, the yield on ten-year government bonds fell back below the three percent mark at 2.88 percent.