S&P 500, Dow slip as Cisco drags, Nasdaq steady after selloff

May 19 (Reuters) – The S&P 500 and the Dow extended losses on Thursday as Cisco Systems slumped after it gave a dismal outlook, while investors fretted over the impact of surging inflation on economic growth and corporate earnings.

Shares of the networking gear maker Cisco Systems Inc. (CSCO) slumped 12.7% as it lowered 2022 revenue growth outlook, taking a hit from Russia exit as well as component shortage due to China lockdowns.

Kohl’s Corp. (KSS) slipped 1.1% after the department store chain cut its full-year profit forecast, the latest US retailer to flag a hit from four-decades high inflation.

The S&P consumer staples index .SPLRCS fell 1.9% to hit a seven-month low and was the biggest decliner among the 11 major sectors as retail firms face the brunt of rising prices hurting the purchasing power of US consumers.

“The consumer component is now starting to weaken, which bolsters the perspective that we are indeed heading into a recession,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.

Consumer spending accounts for more than two-thirds of US economic activity.

In the previous session, the S&P 500 and the Nasdaq closed down more than 4% as growth stocks sank and retailer Target Corp. (TGT) posted weak results.

The benchmark index is down 18.6% from its record close on Jan. 3 and a close below 20% will confirm bear market territory, joining its tech-heavy peer Nasdaq.

Rate-sensitive growth have led the selloff this year as investors adjust to tightening financial conditions with the US Federal Reserve raising rates.

“The central worry facing investors right now is how the Federal Reserve will or will not be able to tame inflation without causing a recession,” Ryan Belanger, managing principal and founder of Claro Advisors said in a note.

“Investors should become accustomed to significant downside and upside moves in stocks, which is common during times of tremendous uncertainty.”

Goldman Sachs strategists predicted a 35% chance of the US economy entering a recession in the next two years, while Wells Fargo Investment Institute expects a mild US recession at the end of 2022 and early 2023.

The Labor Department’s report showed weekly jobless claims unexpectedly rose last week, while a separate data from the Philadelphia Fed showed its business conditions index dropped to a reading of 2.6 in May from 17.6 in April.

At 10:08 a.m. ET, the Dow Jones Industrial Average .DJI fell 0.89% to 31,211.38 and the S&P 500 dropped 0.42% to 3,907.16.

The battered Nasdaq Composite, however, edged 0.26% higher to 11,447.30, boosted by megacap tech and growth shares such as Alphabet Inc. (GOOGL), Microsoft Corp. (MSFT) and Amazon.com (AMZN).

The CBOE volatility index, also known as Wall Street’s fear gauge, rose to 31.57 points, its highest since May 12.

Canada Goose Holdings Inc. (GOOS) jumped 5.3% after it forecast upbeat annual earnings, encouraged by strong demand for its luxury parkas and jackets.

Declining issues outnumbered advancers for a 1.23-to-1 ratio on the NYSE. Advancing issues outnumbered decliners by a 1.08-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 42 new lows, while the Nasdaq recorded four new highs and 257 new lows.

(Reporting by Devik Jain and Amruta Khandekar in Bengaluru; Editing by Shounak Dasgupta, Sriraj Kalluvila and Arun Koyyur)

Philippines kicks off tightening cycle with first rate hike since 2018

MANILA, May 19 (Reuters) – The Philippine central bank raised interest rates for the first time since 2018 on Thursday, joining peers around world in a rush to stem intensifying inflationary pressures that could derail the domestic economy’s recovery.

The central bank also said the strong rebound in domestic economic activity and labour market conditions during the first quarter “provides scope for (the central bank) to continue rolling back its pandemic-induced interventions”, signaling further tightening could be expected.

The Bangko Sentral ng Pilipinas (BSP) lifted the overnight reverse repurchase facility rate by 25 basis points to 2.25%, as expected by the majority of 17 economists in a May 12-16 Reuters poll.

The rates on the overnight deposit and lending facilities were likewise raised by 25 bps to 1.75% and 2.75%, respectively.

The BSP slashed interest rates by a cumulative 200 basis points in 2020 to help revive an economy that had plunged into recession due to the COVID-19 pandemic.

“Persistent inflationary pressures point to the need for prompt monetary action to anchor inflation expectations,” BSP Governor Benjamin Diokno said.

The BSP revised its 2022 average inflation forecast to 4.6%, from 4.3% previously, above the 2%-4% target band. For 2023, inflation is seen closer to the upper end of the same target range at 3.9%.

Diokno also noted the emergence of additional factors that could push inflation higher, such as the higher-than-expected adjustment in minimum wages in some regions, including in metropolitan Manila, which will take effect next month.

Given ample liquidity, a gradual recovery in credit activity, and stable financial market conditions, Diokno said the BSP also decided to “reconfigure” its government securities (GS) purchasing window “from a crisis intervention measure into a regular liquidity facility under our interest rate corridor framework”.

“The recalibrated GS purchasing window shall enhance the BSP’s ability to manage domestic liquidity conditions and ensure the sustainability of its balance sheet,” he said.

(Reporting by Neil Jerome Morales, Karen Lema and Enrico Dela Cruz; Editing by Kanupriya Kapoor and and Tom Hogue)

Oil rebounds from two days of losses in volatile trade

NEW YORK, May 19 (Reuters) – Oil prices rebounded from two days of losses in a volatile session on Thursday, bolstered by weakness in the dollar and expectations that China could ease some lockdown restrictions that could boost demand.

Crude benchmarks continued their spate of wild swings, with both Brent and US crude rising by nearly USD 5 a barrel in the span of a few hours, recovering from losses earlier in the week.

“The market has been extremely volatile,” said Andrew Lipow, president of Lipow Oil Associates in Houston. “The market is reacting to all sorts of different headlines hour to hour, and the movement in oil markets on a day-by-day basis getting even more exaggerated.”

Brent crude futures for July settled at USD 112.04, a gain of USD 2.93 a barrel, or 2.7%. US West Texas Intermediate (WTI) crude futures for June settled up USD 2.62, or 2.4%, to USD 112.21 a barrel.

In China, investors are closely watching plans to ease coronavirus curbs from June 1 in the most populous city of Shanghai, which could lead to a rebound in oil demand from the world’s top crude importer.

Oil markets also rebounded as the dollar weakened. The broad dollar index was down 1% on the day after recent gains. Oil benchmarks often move inversely to the dollar as most global crude transactions are handled in dollars, so a rising greenback makes crude more expensive for big importers.

Crude gains have been limited, however, with the Brent and US benchmarks trading in a range due to the uncertain path of demand. Investors, worried about rising inflation and more aggressive action from central banks, have been reducing exposure to riskier assets.

“Brent seems pinned above USD 100 but I think the recession risk and all of the concerns about Chinese demand are limiting the upside and will continue to do that,” said Bill Farren-Price, head of oil and gas macro research at Enverus in London.

The looming possibility of a European Union ban on Russian oil imports has been supporting prices. This month the EU proposed a new package of sanctions against Russia over its invasion of Ukraine, which Moscow calls a “special military operation.”

That would include a total ban on oil imports in six months’ time, but the measures have not yet been adopted, with Hungary among the most vocal critics of the plan.

(Additional reporting by Yuka Obayashi in Tokyo and Florence Tan in Singapore; Editing by Marguerita Choy, Mark Potter and Nick Zieminski)

Fed policymakers map out shift to ‘measured’ hikes

May 18 (Reuters) – Two US central bankers say they expect the Federal Reserve to downshift to a more measured pace of policy tightening after July as it seeks to quell inflation without lifting borrowing costs so high that they send the economy into recession.

It’s not clear if that view – mapped out on Tuesday by Chicago Federal Reserve Bank President Charles Evans and on Wednesday by Philadelphia Fed chief Patrick Harker – marks a consensus at the Fed for how to bring down the highest inflation in 40 years.

But it does suggest that while policymakers broadly back using half-point rate hikes to get short-term borrowing costs to a range of 1.75%-2% over the next two months, support for sticking to that pace beyond July may be limited.

Evans on Tuesday told an audience in New York City that he expects to transition to “measured” rate hikes after an initial burst of policy tightening. In the Fed lexicon, “measured” means quarter-point rate hikes.

On Wednesday Harker gave a similar assessment, telling the Mid-Size Bank Coalition of America that after July, “I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target.”

As he spoke, the S&P 500 and the Dow Jones Industrial Average were tumbling and ended with the sharpest one-day loss in nearly two years.

“I still am in the camp that we can have, if not a soft landing, a safe landing,” Harker said, noting the strength of the labor market, with nearly two jobs open for every American jobseeker, and an unemployment rate of 3.6%.

The US economy will likely grow between 2% and 3% this year, he said, adding, “this economy can withstand a measured, methodical approach to tightening financial conditions.”

Fed policymakers say the current bout of high inflation — running at more than three times the Fed’s 2% target — is the product of outsized demand bumping up against constrained supply.

Fed Chair Jerome Powell has not been specific about his expectations for the policy path beyond July. On Tuesday he said the Fed will keep pushing on rate hikes until it sees clear and convincing evidence that inflation is cooling.

(Writing by Ann Saphir; Editing by Cynthia Osterman)

Wall Street ends sharply lower as Target and growth stocks sink

May 18 (Reuters) – Wall Street ended sharply lower on Wednesday, with Target losing around a quarter of its stock market value and highlighting worries about the US economy after the retailer became the latest victim of surging prices.

It was the worst one-day loss for the S&P 500 and Dow Jones Industrial Average since June 2020.

Target Corp’s (TGT) first-quarter profit fell by half and the company warned of a bigger margin hit on rising fuel and freight costs. Its shares fell about 25%, losing about USD 25 billion in market capitalization, in their worst session since the Black Monday crash on Oct. 19, 1987.

The retailer’s results come a day after rival Walmart Inc. (WMT) trimmed its profit forecast. The SPDR S&P Retail ETF (XRT) dropped 8.3%.

“We think the developing impact on retail spending as inflation outpaces wages for even longer than people might have expected is a principal factor in causing the market sell-off today,” said Paul Christopher, head of global market strategy at Wells Fargo Investment Institute. “Retailers are starting to reveal the impact of eroding consumer purchasing power.”

Interest-rate sensitive megacap growth stocks added to recent declines and pulled the S&P 500 and Nasdaq lower. Amazon (AMZN), Nvidia (NVDA) and Tesla Inc. (TSLA) dropped close to 7%, while Apple (AAPL) fell 5.6%.

“The cons outweigh the pros for growth stocks at this particular moment, and the market is trying to decide how bad it’s going to get,” said Liz Young, head of investment strategy at SoFi. “The market is fearful of the next six months. We may find out that it doesn’t need to be as fearful as this, and markets do tend to overreact on the downside.”

All of the 11 S&P 500 sector indexes declined, with consumer discretionary and consumer staples leading the way lower, both down more than 6%.

Rising inflation, the conflict in Ukraine, prolonged supply chain snarls, pandemic-related lockdowns in China and monetary policy tightening by central banks have weighed on financial markets recently, stoking concerns about a global economic slowdown.

Wells Fargo Investment Institute on Wednesday said it expects a mild US recession at the end of 2022 and early 2023.

Federal Reserve Chair Jerome Powell vowed on Tuesday that the US central bank will raise rates as high as needed to kill a surge in inflation that he said threatened the foundation of the economy.

Traders are pricing in 50-basis point interest rate hikes by the Fed in June and July.

Unofficially, the S&P 500 declined 4.04% to end the session at 3,923.68 points.

The Nasdaq declined 4.73% to 11,418.15 points, while Dow Jones Industrial Average declined 3.57% to 31,490.07 points. The S&P 500 is down about 18% so far in 2022 and the Nasdaq has fallen about 27%, hit by tumbling growth stocks. Almost two-thirds of S&P 500 stocks are down 20% or more from their 52-week highs, according to Refinitiv data.

Wall Street’s recent sell-off has left the S&P 500 trading at around 17 times expected earnings, its lowest PE valuation since the 2020 sell-off caused by the coronavirus pandemic, according to Refinitiv data.

The CBOE volatility index, also known as Wall Street’s fear gauge, rose to 31 points after falling for six straight sessions.

Volume on US exchanges was 12.5 billion shares, compared with a 13.4 billion average over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 5.09-to-1 ratio; on Nasdaq, a 3.52-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and 37 new lows; the Nasdaq Composite recorded 25 new highs and 242 new lows.

(Reporting by Amruta Khandekar and Devik Jain in Bengaluru and by Noel Randewich in Oakland, Calif.; Editing by Shounak Dasgupta and Lisa Shumaker)

Wall Street slides as growth stocks rally wanes

May 18 (Reuters) – US stock indexes fell on Wednesday as a rally in growth shares faded and Target slumped after the retailer became the latest victim of surging prices.

Shares of Target Corp (TGT) fell 25.1% to the bottom of the S&P 500 after its first-quarter profit halved and the company warned of a bigger margin hit on rising fuel and freight costs.

Shares of other retailers such as Walmart Inc (WMT), Gap Inc GPS.N, Kohl’s Corp. (KSS), Nordstrom Inc. (JWN), Costco (COST), Best Buy (BBY), Macy’s Inc. (M) and Dollar General Corp. (DG) dropped between 4.1% and 11.8%.

All of the 11 major S&P sectors declined in morning trade, with consumer staples and consumer discretionary sectors down 3.5% each.

“Input costs are very important for retailers. Until the supply chain disruption is sorted and labor costs come down, we’re going to continue to see retailers struggle,” Brooke May, managing partner at Evans May Wealth in Indianapolis, said.

Rising inflation, the conflict in Ukraine, prolonged supply chain snarls, pandemic-related lockdowns in China and prospects of aggressive policy tightening by central banks have weighed on the markets recently, stoking concerns about a global economic slowdown.

Federal Reserve Chair Jerome Powell told the Wall Street Journal on Tuesday that the U.S central bank will keep “pushing” on rate hikes until it sees inflation move down in a “clear and convincing way”, not hesitating to move more aggressively if that does not happen.

Traders are pricing in 50 basis point interest rate hikes by the Fed in June and July.

“The market is very concerned about higher rates and the Fed potentially overshooting and softening the economy,” May said.

“Higher rates will obviously eat into retail spending, in addition to corporate profits, and the market is just trying to digest that.”

The S&P 500 is down 15.6% so far in 2022 and the Nasdaq has fallen more than 24%, hit by growth stocks.

Rate-sensitive Big Tech and growth companies such as Microsoft Corp. (MSFT), Apple Inc. (AAPL), Google owner-Alphabet Inc. (GOOGL), Meta Platforms (FB), Tesla Inc. (TSLA) and Amazon.com (AMZN) fell between 1.7% and 4% after leading a sharp rebound on Wall Street in the previous session.

At 10:09 a.m. ET, the Dow Jones Industrial Average was down 488.86 points, or 1.50%, at 32,165.73, the S&P 500 was down 69.72 points, or 1.71%, at 4,019.13, and the Nasdaq Composite was down 203.08 points, or 1.69%, at 11,781.44.

Lowe’s Cos Inc. (LOW) fell 2.1% after reporting a bigger-than-expected drop in same-store sales, as demand eased for its home-improvement tools and building materials from pandemic highs.

However, TJX Cos Inc (TJX) climbed 11% after the discount store operator forecast upbeat annual profit helped by price increases.

The CBOE volatility index , also known as Wall Street’s fear gauge, rose to 27.84 points, after falling for six straight sessions.

Declining issues outnumbered advancers for a 2.76-to-1 ratio on the NYSE and a 1.94-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 30 new lows, while the Nasdaq recorded 26 new highs and 90 new lows.

(Reporting by Amruta Khandekar and Devik Jain in Bengaluru; Editing by Shounak Dasgupta)

Marcos set for supermajority as ‘Uniteam’ dominates Congress

MANILA, May 18 (Reuters) – Philippines president-elect Ferdinand Marcos Jr is all but certain to command a supermajority in Congress, a proclamation of winners showed on Wednesday, boosting chances of advancing his legislative agenda when he takes power next month.

All but two of the 12 candidates declared winners of Senate seats by the election commission were allied with Marcos’s “Uniteam” political juggernaut, adding to a new lower house revealed last week that was dominated by parties that sided with the presumptive president.

Marcos, the son and namesake of the disgraced dictator driven from power in a 1986 uprising, has yet to reveal a policy agenda, but many analysts expect him to continue from where outgoing leader Rodrigo Duterte left off.

“It will be easy for the incoming administration, given the support they have from the local government and political families, to get their way in terms of legislative agenda,” said Ranjit Rye, a political science professor at the University of the Philippines.

Marcos, 64, who won last week’s election in a landslide, inherits an economy on a stronger footing but will need to raise revenue for infrastructure and addressing big debts from Duterte’s pandemic borrowing.

A legislative majority was expected and Marcos’s opponents have expressed fear he will use it push through constitutional changes to entrench his family’s rule for decades to come.

Marcos Jr’s crucial alliance with running mate and incoming vice president Sara Duterte-Carpio – the president’s daughter – could ensure support in Congress and co-opt politicians loyal to her father, who also enjoyed majority legislative support.

The new senators join 12 incumbents who were elected in mid-term polls in 2019, most of those Duterte supporters.

Widely expected to become Senate president is Cynthia Villar, wife of a billionaire, whose son also won a Senate seat having campaigned under Marcos’s “Uniteam”.

Marcos’s cousin, Ferdinand Martin Romualdez, is likely to become lower house speaker, according to political analysts, having received pledges of support from the overwhelming majority of the 300 newly lower house lawmakers, among them Marcos’s eldest son.

Cristina Palabay, secretary general of rights group, Karapatan, said the backing Marcos will have does not bode well for checks and balances.

“It is worrisome that Marcos and Duterte allies will have supermajority,” Palabay said.

“His priorities and agenda can be anything that is consistent with his father’s policies and politics, and to Duterte’s.”

(Reporting by Neil Jerome Morales; Additional Reporting by Karen Lema; Editing by Martin Petty)

Space narrowing for Philippines’ accommodative policy

MANILA, May 18 (Reuters) – The space for maintaining the Philippine central bank’s accommodative monetary policy has narrowed and authorities stand ready to make adjustments, its governor said on Wednesday, a day ahead of its policy meeting.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the domestic economy’s faster-than-expected growth in the first quarter, at an annual pace of 8.3%, and ongoing downside risks “strengthen the case for a withdrawal of monetary policy accommodation”.

The BSP is expected to raise the overnight reverse repurchase facility rate PHCBIR=ECI by 25 basis points to 2.25% on Thursday to curb rising inflationary pressures, according to most economists in a May 12-16 Reuters poll.

“Second-round effects are starting to manifest,” Diokno told a media briefing, referring to the inflationary pressures that drove the annual headline figure to 4.9% in April, soaring above the 2%-4% target band this year.

“Inflationary pressures now appear more likely to persist and threaten to disanchor inflation expectations,” he said.

A rate rise on Thursday will be the BSP’s first since 2018.

Diokno said average inflation could settle above 4% this year, but is expected to drop back within the same target range of 2%-4% in 2023.

Economists in the Reuters poll also expected the BSP to pick up the tightening pace, with a majority anticipating the benchmark rate to rise to 2.50% by end-September, while the rest predicted it will reach 2.75% or higher.

More interest rate rises are on the way, with rates reaching 3.00% by end-2022, the Reuters poll median showed, up from 2.50% predicted in the previous survey.

Diokno said any policy adjustment will be done “in a timely manner” but did not give a detailed timeline.

The BSP slashed interest rates by a cumulative 200 basis points in 2020 to help revive an economy that had plunged into recession due to prolonged and stringent COVID-19 lockdowns.

(Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Martin Petty and Kanupriya Kapoor)

Fed’s Evans backs ‘front-loaded’ rate hikes, then measured pace

By Dan Burns

May 17 (Reuters) – Chicago Federal Reserve Bank President Charles Evans on Tuesday said he supports an initial burst of monetary policy tightening, and then a more “measured” pace of rate hikes to allow time to assess inflation and the impact of higher borrowing costs on the job market.

“I think front-loading is important to speed up the necessary tightening of financial conditions, as well as for demonstrating our commitment to restrain inflation, thus helping to keep inflationary expectations in check,” Evans said in remarks prepared for delivery to Money Marketeers of New York University.

Inflation, running at more than three times the Fed’s 2% target, is “much too high,” Evans said, and the Fed should raise its policy rate “expeditiously” to a neutral range of about 2.25%-2.5%.

Fed policymakers have begun doing so. They raised rates by a bigger-than-usual half-of-a-percentage point earlier this month, to a range of 0.75%-1%, and Fed Chair Jerome Powell signaled at least two more such rate hikes to come. The Fed also plans to start trimming its $9 trillion balance sheet next month.

But Evans’ preference for transitioning to a more “measured pace” – a phrase that in the past has meant quarter-point rate hikes — sounded a bit more dovish than Fed Chair Jerome Powell, who spoke earlier in the day.

The central bank, Powell told the Wall Street Journal on Tuesday, will keep “pushing” on rate hikes until it sees inflation move down in a “clear and convincing way” and will not hesitate to move more aggressively it that does not happen. nL2N2X9228

Evans said that slowing the pace of rate hikes after an initial front-loading would give the Fed time to check if supply chain kinks ease, and to evaluate inflation dynamics and the impact of higher borrowing costs on what called a “downright tight” labor market.

Unemployment is at 3.6% and job openings are at a record high.

“If we need to, we will be well positioned to respond more aggressively if inflation conditions do not improve sufficiently or, alternatively, to scale back planned adjustments if economic conditions soften in a way that threatens our employment mandate,” Evans said.

With inflation pressures as broad and strong as they are, he said, interest rates may need to rise “somewhat” above neutral to bring down inflation.

Traders are betting on that, with prices in futures contracts tied to the Fed’s policy rate reflecting expectations for an end-of-year policy rate range of 2.75%-3%.

But in Evans’ view that doesn’t mean the Fed will end up triggering a recession, as critics including several former U.S. central bankers have recently warned. nL2N2WX21P

“Given the current strength in aggregate demand, strong demand for workers, and the supply-side improvements that I expect to be coming, I believe a modestly restrictive stance will still be consistent with a growing economy,” Evans said.

(Writing by Ann Saphir; Editing by Sandra Maler)

((Ann.saphir@thomsonreuters.com))

Consumer stocks diverge as Walmart disappoints, citing inflation

May 17 (Reuters) – Shares in consumer discretionary and staples stocks were trading in opposite directions on Tuesday as encouraging retail sales data was countered by disappointing earnings and financial targets from Walmart (WMT), which blamed high inflation.

Walmart shares closed down 11.4% after it reported a 25% quarterly earnings decline and cut its full-year profit outlook due to rising fuel and labor costs, while shoppers, squeezed by decades-high inflation on basic needs like food, reined in purchases of nonessential items.

That put Walmart shares on track for its biggest daily percentage drop since an 11.79% tumble on Oct 16, 1987, the last trading session before the “Black Monday” stock market crash in which the Dow Jones Industrial Average plunged more than 22%.

Dragged by Walmart, shares in Target Corp. (TGT) finished down over 1% ahead of its earnings report due Wednesday morning. Dollar General (DG) and Dollar Tree (DLTR) both fell 3%.

But while the S&P 500 consumer staples sector declined 1%, the benchmark’s consumer discretionary sector gained 2.7% as some clothing, travel and automaker shares gained ground.

Data showed US retail sales rose strongly in April as consumers spent more on motor vehicles due to supply improvements. They also spent more at restaurants, boosting the economy at the start of this quarter.

The contrast, according to some strategists, is because soaring inflation has a bigger impact on lower-income customers who shop at Walmart or dollar stores than consumers who can still buy pricier items from companies including Under Armour (UAA), up 4%, Ralph Lauren (RL), up 3.8% and PVH Corp. (PVH) up 3.4%.

Since price increases resulting from the war between Russia and Ukraine were in purchases “the consumer cannot do without” such as food and energy, Eric Theoret, global macro strategist at Manulife said, the lower-income consumers are seeing “real income shock.”

“In terms of ability to spend, the lower-end consumer is also much closer to having exhausted their pandemic savings. With respect to earnings, we are seeing solid wage gains at the lower quintiles but even these are unable to keep pace with inflation – eroding consumers’ ability to spend,” Theoret said.

This trend was also in evidence in shares of packaged food companies such as Kraft Heinz (KHC), down 2% and General Mills (GIS), down 0.7%, after Walmart said shoppers switched to cheaper store-branded goods from well known labels.

Still, while some wealthier consumers are also looking for grocery store savings, the retail sales data showed that people still have money to spend, noted Lindsey Bell, chief markets and money strategist at Ally.

“The consumer is still spending. The consumer isn’t dead … The consumer is really interested in spending their money on services and experiences,” said Bell, noting that it might be part of the reason clothing store shares were rising.

“Going out, taking part in different activities requires you dress the part,” she said.

Also, so far in 2022, the staples sector has outperformed, showing a 1% year-to-date decline compared with a plunge of about 25.9% in consumer discretionary stocks.

“Investors are starting to realize they left consumer discretionary sector stocks in general for dead with a big exit from the discretionary sector and into staples,” said Bell.

Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, noted that even though consumers are very fearful right now, “they are in really good shape.”

“Almost every fear we have is really tied to one fear – inflation,” said Paulsen. But he believes inflation may be stabilizing, which would mean investors and consumers can also stop worrying about things like rising bond yields, Federal Reserve rate hikes or an imminent recession.

“If inflation is rolling over it’s going to lift consumer confidence. I think it’s going to run right through Main Street as well as Wall Street,” he said.

(Reporting By Sinéad Carew, additional reporting by Chuck Mikolajczak; Editing by David Gregorio)

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