Inflation-Battered Retailers Spur Vast Market Selloff

Financial Daily Dose 5.19.2022

May 19, 2022

Falling retail profits and lowered forecasts for the year to come helped drive a mega midweek selloff on Wall Street, as “stocks had their worst day yet in a series of already ugly drops after shrinking profits by major retailers reignited Wall Street’s fear of high inflation.” The S&P 500 was down some 4%, the Dow more than 1000 points, and the Nasdaq fell 4.7% - NYTimes and Bloomberg and WSJ and MarketWatch and Marketplace

Minnesota-based Target Corp. really took it on the chin on Wednesday. Its shares dipped 25%--the worst daily fall since 1987’s Black Monday—after the retailer reported “quarterly profits that fell far short of analysts’ expectations, hit by inflation, supply issues and changing consumer habits.” Company revenue was actually up by 4% last quarter, but Target’s move to lower profitability forecasts for the rest of the year (thanks to inflation and consumers shifting, as expected, from spending on services over goods) freaked the Street - NYTimes and Bloomberg and WSJ and MarketWatch

Gabe Plotkin’s Melvin Capital announced this week that it is winding down its funds and returning cash to investors, “capping a stunning reversal for a firm that lost big on the surge in meme stocks in the early days of the pandemic” - WSJ and Bloomberg and NYTimes

In a split 2-1 decision, a Fifth Circuit appellate panel found that the SEC’s use of in-house ALJs to decide a civil fraud case “violated a hedge fund manager’s Seventh Amendment right to a jury trial,” throwing a wrench in a common practice among regulatory agencies to pursue charges before administrative law judges “rather than . . . filing . . . civil complaints in federal court” - NYTimes and Law360

Yet another former Fed Chair—this time, Janet Yellen, the current Treasury Secretary—is on record with the S Word, noting in comments before a G7 finance minister meeting in Bonn this week that “elevated food and energy prices are depressing both spending and economic output” and creating “stagflationary effects” around the world - NYTimes and WSJ and Bloomberg

Inflation, by the way, is hardly a uniquely American problem these days - NYTimes

Goldman Sachs’ DJ D Sol sees a 30% risk of recession in the next 2 years but considers himself “not overly concerned about that risk” and highlighted instead the major risk that “extremely punitive” inflation poses to the economy and society in general - Bloomberg and MarketWatch

Citing Tesla’s poor handling of “accusations of racial discrimination at its factory in California,” the S&P 500 ESG Index (“a listing of companies that meet certain environmental, social and governance standards”) has removed the e-car maker from its “index of socially responsible companies.” Shocker of shockers, Elon didn’t take it well - NYTimes and WSJ and Bloomberg

Come on, Wells. Seriously. A group of current and former Wells Fargo employees has gone on record with damning reports of the bank conducting interviews with “diverse” candidates “even though the decision had already been made to give the job to another candidate”—all part of “helping Wells Fargo record its diversity efforts on paper . . .rather than hiring more women or people of color” - NYTimes

Troubled sportswear brand Under Armour is losing its CEO, Patrik Frisk, after two years on the job. UA has named Colin Browne as interim president and CEO, effective June 1. Frisk took over the company from founder Kevin Plank and has presided over two tough Covid-tainted years that have seen company shares fall nearly 50% - WSJ

Kudos, U.S. Soccer, and about damn time - NYTimes and Law360

Stay safe,

MDR

 

The Robins Kaplan Financial Daily Dose features top stories and latest news headlines in financial markets, banking, securities and technology topics.