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Market Snapshot: S&P 500 slips as Target weighs on retailers but one market technician sees scope for more gains

U.S. stocks slipped on Wednesday, with the Dow wavering between marginal gains and losses, after Target delivered a poorly-received earnings report that weighed on shares of retailers, while concerns about the Ukraine war unnerved investors.

How are stocks trading

S&P 500

falls 24 points, or 0.6%, to 3,966.

Dow Jones Industrial Average

fell 4 points, or less than 0.1%, to 33,589.

Nasdaq Composite

fell 152 points, or 1.3%, to 11,206.

On Tuesday, the Dow Jones Industrial Average

rose 56 points, or 0.17%, to 33593, the S&P 500

increased 34 points, or 0.87%, to 3992, and the Nasdaq Composite

gained 162 points, or 1.45%, to 11358.

Read: What’s in among stock-market traders — and what’s out — according to Charles Schwab survey

What’s driving markets

U.S. retail sales jumped 1.3% in October, suggesting U.S. consumers are still spending a lot of money despite the Federal Reserve’s efforts to slow the economy.

See: Retail sales jump in October in sign of economic strength.

Still, stocks weakened after Target Inc.

delivered a poorly-received earnings report, which sent its shares tumbling and weighed on other big-box retailers like Best Buy Co.

Investors were taken aback particularly because Walmart Inc.’s

earnings a day earlier painted a much more robust picture of the state of the U.S. consumer heading into the all-important holiday season.

“Target’s signal that a consumer spending recession was unfolding heading into the all-important holiday shopping season came as a shock to some investors after yesterday Walmart reassured trends were ok,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab.

Geopolitical issues also were a factor on Wednesday as European indexes sold off as investors feared that a missile that had hit Poland on Tuesday might spark a confrontation between Moscow and NATO. The STOXX Europe 600

was down roughly 1%.

However, Washington said the missile was an errant Ukrainian attempt to destroy incoming Russian projectiles.

U.S. stocks have been up six of the previous eight trading days, bolstered by last week’s softer-than-expected October consumer prices report and Tuesday’s weaker-than-forecast producer-price data, both of which raised hopes that the Federal Reserve might be less aggressive than previously feared.

Katie Stockton, a market analyst at Fairlead Strategies, said stocks were ripe for a brief pullback, although technical factors suggest the major U.S. indexes will resume their uptrend as the holiday season in the U.S. gets underway.

“Short-term overbought conditions have returned for the major indices, but we think they will be absorbed via consolidation this week before another extension higher next week,” she said in a note to clients published Wednesday. “Thanksgiving week tends to finish on an up-note according to the Stock Trader’s Almanac, and it kicks off the holiday season which has a favorable historical record.”

See: Here are four worrying signs that inflation may linger, from one bond fund manager

“The tame U.S. producer prices reading underpinned hopes that pipeline inflation pressure is easing and pulled bond yields lower again,” said Ian Williams, strategist at Peel Hunt.

The 2-year Treasury yield
which is particularly sensitive to monetary policy, was up 4.2 basis points to 4.387%, but sits more than 30 basis points off its 15-year high touched at the start of November.

“The broad market rally continues, and investors generally remain constructive for now,” said Stephen Innes, managing partner at SPI Asset Management.

Several senior Fed officials are also speaking on Wednesday, including New York Fed President John Williams, who said that a properly functioning Treasury market is critical during an appearance at the 2022 U.S. Treasury Market Conference on Wednesday.

San Francisco Federal Reserve President Mary Daly said Wednesday that the central bank’s benchmark interest rate may have to rise above 5% to start to put downward pressure on inflation, with somewhere between 4.75% and 5.25% looking like a reasonable range, she said.

Fed Governor Christopher Waller is down to talk on the economic outlook at 2:35 p.m.

U.S. industrial production fell 0.1% in October, the Federal Reserve reported Wednesday.

October industrial production shrank 0.1% according to data released by the Federal Reserve, disappointing hopes for a 0.1% gain, according to a survey by The Wall Street Journal.

The National Association of Home Builders’ monthly confidence index fell 5 points to 33 in November, the trade group said on Wednesday.

Semiconductor stocks are seeing a massive rebound after tumbling to their lowest level in two years in October based on the value of the PHLX Semiconductor Sector Index

Semis were rebounding hard this week, with SOX up nearly 4% on Wednesday one after Warren Buffett’s Berkshire Hathaway revealed a $4 billion stake in the chips giant Taiwan Semiconductor Manufacturing TW:2330 in a filing released earlier in the week. SOX is up more than 25% over the past month.

With so much happening in the sector, traders will likely be keeping a close eye on the results of NVIDIA Corp.
due for release after Wednesday’s closing bell.

Read: Warren Buffett’s chip-stock purchase is a classic example of why you want to be ‘greedy only when others are fearful’

Companies in focus

Carnival Corp.

was off sharply after announcing plans to issue more debt.

Lowe’s Inc. 
the home improvement retailer, reported third-quarter earnings on Wednesday that beat analysts’ expectations, with revenue up compared to the same period last year.

Shares of Advance Auto Parts Inc.

plunged 15% in premarket trading Wednesday, after the specialty retailer missed Wall Street expectations for its quarterly earnings as it sold more of its cheaper in-house brands than national brands.

—Jamie Chisholm contributed reporting

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