By Sinéad Carew

NEW YORK (Reuters] – Evidence of inflation in the US is alarming investors. Large U.S. retailers have shown that consumers are cutting back on larger ticket items, as they try to survive.

Investors lost almost 25% Target After its profit fell by half, (NYSE:), shares dropped Wednesday as Walmart (NYSE.) reported poor results.

Target showed that customers spend more on food, household necessities and discretionary goods than they do high-margin products. Walmart however showed that buyers are moving to lower-margin essentials.

On Thursday, investors will be focusing on the earnings from Kohl’s (NYSE :), which dropped 11% Wednesday and BJ’s Wholesale Club which fell 16%.

It all happened just days after Jerome Powell (Federal Reserve Chair) promised that the U.S. central banks would raise interest rates so high they could stop an inflation surge.

Paul Christopher, global market strategist at Amazon said that retailers are beginning to see the effects of declining consumer buying power. Wells Fargo (NYSE:) Investment Institute forecasted a moderate recession from year-end to early 2023, the day before.

“The consumer is losing their ability to buy at a quicker pace than they did a month ago. He said that he believes the pace will accelerate.

On Wednesday, the closing was down by 4% for the day and 17.7% overall. It is also down 18.2% compared to its January 3 record close. [.N]

The benchmark index’s consumer discretionary Index lost 6.6% and is currently down 30.8% in 2022.

Cantor Fitzgerald stated that it is not expecting a quick-term rebound in equity markets and said that even if it did, the lift would be short-lived and probably “not worth playing”.

Eric Johnston from Cantor Fitzgerald, Head of Equity Derivatives and Cross Assets at Cantor Fitzgerald said that “The Wal-Mart/Target numbers are extremely concerning because they show the customer is reducing discretionary purchase while company margins recover to pre-pandemic level.”

Although investors are concerned about inflation since a while, these latest findings add fuel to the concern about how inflation will affect consumers, stated Ryan Detrick chief market strategist, LPL Financial (NASDAQ).

The selling of the U.S. stock market was triggered by data that showed U.S. retail sales increased strongly in April. Consumers bought more vehicles and spent more at restaurants, despite rising inflation, a deteriorating consumer mood, and increasing interest rates.

Cornerstone Wealth’s chief investment officer Cliff Hodge stated that the story was shifting from an inflation scare into a recession scare.

Chuck Carlson, chief executive officer at Horizon Investment Services said retailer results appeared to be potentially “one more indication of perhaps a slowdown in the economy.”

“I just wonder if people are starting to really get pinched by fuel costs – both businesses as well as consumers … When you are paying north of $5 for a gallon of gas, that’s a hammer and that’s a hammer on everybody,” Carlson said.