Stock futures fall after Walmart cut forecast, says inflation hit consumer spending

U.S. stock futures fell Monday night after Walmart slashed its earnings forecast, sending after-hours retail stocks plummeting.

Dow Jones Industrial Average futures fell 134 points, or 0.42%. S&P 500 and Nasdaq 100 futures fell 0.31% and 0.38% respectively.

A late Monday announcement from Walmart, which cut its quarterly and annual earnings estimates due to rising food inflation, alarmed investors who deliberated implications for other retail stocks. The big-box retailer said the higher prices are prompting consumers to cut back on spending on general merchandise, particularly in clothing.

Walmart plunged nearly 9% in extended trade and dragged other retailers down with it. The target fell by 5% and Amazon by 4%. Macy’s and Dollar General each fell 3%, while Costco lost 2%.

“Obviously they’ve got the bad stuff, and they need to sell it more aggressively to get rid of it, which looks like it’s going to take a pretty dramatic hit,” Jeremy Bryan, senior portfolio manager at Gradient Investments, said during from CNBC’s “Closing Bell: Overtime.”

“The question is, how does this relate to the rest of the discretionary space?” Bryan added.

Stocks during Monday’s session traded in a narrow range, with the S&P 500 adding 0.1%. The Dow Jones Industrial Average climbed 90.75 points, or 0.3%. The tech-heavy Nasdaq Composite lagged, slipping 0.4%. All major averages are on track for their best month of the year.

Traders brace this week for a flurry of tech earnings and mega-cap economic data, as well as Federal Reserve meeting results, that will help guide Wall Street’s expectations for the rest of the year. .

“I think there’s going to be a bifurcated market,” VantageRock Capital’s Avery Sheffield said on CNBC’s “Closing Bell: Overtime.” “I think the dip might be in some stocks, but nowhere in others. So this might be one of the strongest earnings seasons we’ve seen in a long time.”

On Tuesday, the Federal Reserve will begin its two-day policy meeting. Traders are widely expecting a three-quarter percentage point hike.

Coca-Cola, McDonald’s and General Motors are expected to report earnings on Tuesday before the bell. Alphabet, Microsoft, Chipotle Mexican Grill, UPS and Enphase Energy will report after the bell.

On the economic front, traders await the latest reading of the Case-Shiller home price index at 9 a.m. ET. The consumer confidence report and new home sales data are due out at 10 a.m. ET.