US STOCKS-Wall St slips as growth shares weigh; Target’s margin warning hits retail sector

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By Devik Jain and Susan Mathew

June 7 (Reuters) – U.S. stock indexes fell on Tuesday as elevated Treasury yields hit rate-sensitive growth stocks, while Target Corp’s gloomy margin forecast spooked the retail sector.

Shares of Target TGT.N slid 4% as the big-box retailer said it would have to offer deeper discounts and cut back on stocking discretionary items. nL4N2XU2A7

The weak outlook weighed on other retail stocks, with main rival and Dow component Walmart Inc WMT.N falling 2.3%. Dollar General DG.N, Nordstrom Inc JWN.N, Macy’s Inc M.N, Costco COST.O, Home Depot HD.N and Best Buy Co Inc BBY.N fell between 0.3% and 3.2%.

“When you get inflation elevated and demand cooling off, you do get margin pressure. This was already the case in first-quarter numbers and now we get more indications that it’s continued pressure, not just a one-off quarter thing,” said Andrea Cicione, head of strategy at TS Lombard.

“It’s not doom and gloom, but we think that the downside risk to growth is growing. This is still a market where you want to fade the rallies as opposed to buying the dip.”

Nine of the 11 major S&P sectors declined in morning trade, with consumer discretionary sector .SPLRCD down 1.5%. Energy .SPNY climbed 1.2%, while healthcare .SPXHC edged higher.

Interest-rate sensitive technology and growth stocks retreated, as benchmark U.S. 10-year Treasury yields hovered below 3% ahead of inflation data on Friday.

Tesla Inc TSLA.O and Amazon.com AMZN.O fell 1.1% and 1.9%, respectively, to weigh the most on the S&P 500 and the Nasdaq.

A hot reading on the consumer price index could bolster expectations that the Fed will continue to aggressively hike rates in the second half of the year, at a time when labor market is buoyant and consumers spending remains resilient.

Money markets are expecting a 50-basis points rate increase next week, followed by July and possibly in September. FEDWATCH

“A 50 basis point rate hike is probably appropriate. It may not be keeping pace with inflation, but I think going too aggressive would scare the market and not do much good,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

At 9:52 a.m. ET, the Dow Jones Industrial Average .DJI was down 167.50 points, or 0.51%, at 32,748.28, the S&P 500 .SPX was down 16.01 points, or 0.39%, at 4,105.42, and the Nasdaq Composite .IXIC was down 39.43 points, or 0.33%, at 12,021.94.

Global shares also fell as a surprise 50-basis-point rate increase in Australia raised concern over policy tightening, while oil prices hovered just below $120 a barrel. nL1N2XU0K2

Block Inc SQ.N and Affirm Holdings Inc AFRM.O shed 1.3% and 4.7%, respectively, after Apple launched its buy now, pay later service, called Apple Pay Later. nL1N2XT0W2

Kohl’s Corp KSS.N jumped 9.8% as the department store chain entered exclusive talks with retail store operator Franchise Group Inc FRG.O over a potential sale that would value it at nearly $8 billion. nL4N2XT38M

The CBOE volatility index .VIX, Wall Street’s fear gauge, rose for a third straight day and was last up at 25.69 points.

Declining issues outnumbered advancers for a 2.16-to-1 ratio on the NYSE and for a 1.52-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week highs and 30 new lows, while the Nasdaq recorded 10 new highs and 70 new lows.

(Reporting by Devik Jain, Susan Mathew and Mehnaz Yasmin in Bengaluru; Editing by Arun Koyyur and Anil D’Silva)

((Devik.Jain@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2062; ;))