S&P 500, Nasdaq slip on Micron’s supply cut, Target outlook By Reuters

By Amruta Khandekar and Ankika Biswas

(Reuters) – The and Nasdaq fell on Wednesday as a grim outlook from Target spurred fresh concerns for retailers heading into the crucial holiday season, while Micron’s supply cut triggered a selloff in the chip sector.

Target Corp (NYSE:) tumbled as much as 17% in early trading as a pullback in consumer spending despite heavy discounting cut its third-quarter profit by half.

Its bleak results jolted the retail sector, with shares of Macy’s Inc (NYSE:), Best Buy Co Inc (NYSE:) and Dollar Tree Inc (NASDAQ:) dropping between 1.6% and 8.9%.

Meanwhile, Micron Technology Inc (NASDAQ:) said it will reduce memory chip supply in 2023 and make more cuts to its capital spending plan, as it struggles to clear excess inventory due to a demand slump.

Shares of other chip stocks such as Intel Corp (NASDAQ:), Advanced Micro Devices (NASDAQ:), Applied Materials (NASDAQ:) and Lam Research (NASDAQ:) fell between 2% and 6%, weighing heavily on the tech-heavy Nasdaq.

“There are two things weighing on market sentiment; you’re seeing softer demand in two sectors with Target in the retail sector and Micron with the chips,” said Dennis Dick, market structure analyst and trader at Triple D Trading, highlighting Micron’s drag on other chipmakers.

Investors will also keep an eye on chipmaker Nvidia (NASDAQ:) Corp’s earnings, which is expected later in the day.

Despite the sales warning from Target, data showed U.S. retail sales increased more than expected in October, boosted by purchases of motor vehicles and suggesting that consumer spending remained stable.

The data and earnings reports come on the heels of upbeat quarterly results from Walmart (NYSE:) Inc on Tuesday that had added to market optimism driven by a softer-than-expected producer prices report.

All the three main indexes ended higher in the previous session as geopolitical worries were overshadowed by expectations that the improved inflation outlook would allow the Federal Reserve to shift to smaller interest rate hikes as soon as December.

Several Fed officials have also signaled that the central bank could slow its pace of tightening while stressing the need to continue to raise borrowing costs to stamp out high inflation.

San Francisco Federal Reserve Bank President Mary Daly on Wednesday said it is reasonable for the U.S. central bank to raise its policy rate to the 4.75%-5.25% range by early next year, with a 5% policy rate as a “reasonable starting point.”

At 13:04 a.m. ET, the was up 18.28 points, or 0.05%, at 33,611.20, the S&P 500 was down 20.36 points, or 0.51%, at 3,971.37, and the was down 124.92 points, or 1.10%, at 11,233.49.

Among other stocks, home improvement retailer Lowe’s Companies Inc (NYSE:) jumped 4.9% after increasing its annual profit forecast on steady demand.

U.S.-listed shares of Grab Holdings Ltd rose 1.4% after the ride-hailing and food delivery firm bumped up its 2022 revenue forecast.

Declining issues outnumbered advancers for a 1.73-to-1 ratio on the NYSE and for a 2.23-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and two new lows, while the Nasdaq recorded 50 new highs and 104 new lows.