•  Walmart Inc. (WMT.N), the industry leader, lowered its estimate, igniting concerns about a broader slowdown in spending as high inflation drives up expenses for customers.
• Shares of Walmart fell over 8%, while those of Amazon (AMZN.O) and Target (TGT.N) both had declines of over 4%.
• The benchmark S&P 500 consumer discretionary sector (.SPLRCD) experienced the largest decline of the sectors, falling by 2.8 percent while the index as a whole lost roughly 1 percent.

Shares of American retailers fell, after Walmart Inc. (WMT.N), the industry leader, lowered its estimate, igniting concerns about a broader slowdown in spending as high inflation drives up expenses for customers.

Shares of Walmart fell over 8%, while those of Amazon (AMZN.O) and Target (TGT.N) both had declines of over 4%. The benchmark S&P 500 consumer discretionary sector (.SPLRCD) experienced the largest decline of the sectors, falling by 2.8 percent while the index as a whole lost roughly 1 percent.

The latest concerning indicator about an economy that some investors worry is headed for a recession was Walmart’s estimate.

The president of Chase Investment Counsel in Charlottesville, Virginia, Peter Tuz, said: “It’s a telling sign that the regular consumer is hurting.” “You have to take it very seriously when you have America’s largest retailer guide down like this.”

According to analysts at Jefferies, Walmart’s outlook offered “a diagnostic look at the average American home,” demonstrating how consumers are adjusting to increasing prices for food and other necessities while spending less on discretionary items like clothing.

The largest private company in the country predicted a 13 percent drop in annual profit and said it would aggressively lower apparel and general item costs to draw in customers.

It will feel like a recession in clothing whether the economy as a whole is in or is about to enter one, according to Citi Research analysts in a note.

The Walmart news, according to JPMorgan analysts, “represents another data point of increasing consumer slack over the past two months… as consumers buckle under sustained inflationary headwinds and drain buffers built up during COVID,” they wrote in a note.

The Federal Reserve is meeting on Tuesday and Wednesday, which coincides with Walmart’s pessimistic outlook. The U.S. central bank must strike a balance between boosting interest rates in the upcoming months to rein in rising inflation and preventing the economy from entering a recession.

Kim Forrest, chief investment officer at Bokeh Capital Partners, said: “I’m sure the Fed will talk about all of this today and tomorrow.” “We are witnessing demand destruction, which must be taken into account in their rate-hike calculations.”

Other retail stocks that declined on Tuesday were Best Buy (BBY.N), Costco (COST.O), and Dollar Tree (DLTR.O). Best Buy fell by 4.4 percent, Costco by 3.5 percent, and Dollar Tree by 5.3 percent.