Stocks resume their rout as falling profits reignite fears of inflation.

A short reprieve for investors ended abruptly on Wednesday 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 fell 4 percent, its biggest drop since June 2020 and its fourth decline of more than 3 percent in less than a month, erasing gains in the index since late last week. The tech-heavy Nasdaq composite dropped 4.7 percent.

Retailers led the decline. Target plunged 24.9 percent, making it the worst performer in the S&P 500, after the company reported on Wednesday that high costs affected its profits in its latest quarter. It also lowered its forecast for the year.

The warning echoed a similar report from Walmart, which said on Tuesday that its profit fell 25 percent from a year ago in the quarter and also issued a grim forecast. It was down 6.8 percent on Wednesday after falling more than 11 percent the day before.

Other retailers were sharply lower. Costco fell 12.5 percent; Dollar Tree fell 14.4 percent; and Best Buy dropped 10.5 percent.

Retailers are being pinched by higher costs for fuel after Russia’s invasion of Ukraine, and the sanctions imposed or proposed as a result, caused a jump in oil prices. On Wednesday, futures for oil contracts were slightly lower at about $110 a barrel — but that price was still well above the approximately $78 a barrel crude oil futures traded for at the end of last year. And AAA said gas prices in the United States pushed to a new high on Wednesday — $4.57 on average for a gallon of regular — climbing well above its peak price in March. The average is now above $4 in every state.

Both Target and Walmart said that their sales actually rose slightly as shoppers kept spending even with prices rising across the economy. On Tuesday, the government said consumer spending in the United States continued to climb in April. That eased investors’ concerns about the health of the economy, but the upbeat sentiment didn’t last long.

“Consumers are weathering the inflation hit,” Fiona Cincotta, a senior financial markets analyst at Forex.com, wrote in a note. “Retailers, however, are not doing so well at navigating through 40-year high inflation.”

Big swings have come to characterize trading on Wall Street in recent weeks as investors have struggled to face the uncertainty. The Federal Reserve is quickly raising interest rates to combat rapid inflation. And economists are worried that the economy is at risk of a recession because consumer activity could ebb as borrowing costs rise.

“Wall Street was anticipating that we were going to see a peak of inflation a month ago,” said Edward Moya, a senior market analyst at Oanda. “Earnings season is telling us that these pricing pressures are not easing and that consumers should expect higher prices moving forward. That will force the Fed into a difficult decision where they might have to tighten more aggressively, and that could weigh on economic growth.”

Jerome H. Powell, the chair of the Fed, said on Tuesday that the central bank would “have to consider moving more aggressively” if policymakers don’t see clear indications that inflation is cooling.

The recent volatility has come with the S&P 500 hovering just above bear market territory, or a 20 percent drop from its most recent high. Passing that threshold generally reflects a lasting shift in tone among investors. By Wednesday afternoon, the index was 18.2 percent below its Jan. 3 high and was heading for its seventh consecutive weekly decline, its worst stretch since 2001.

Volatility has also gripped other markets. The rate on 10-year U.S. Treasury notes, a benchmark for borrowing costs across the economy, fell to 2.9 percent on Wednesday after climbing above 3 percent earlier this month, touching its highest level since 2018.