Stock futures drop after Walmart cuts its forecast, says inflation hits consumer spending

US stock futures fell Monday night after Walmart cut its earnings forecast, sending retail stocks tumbling after hours.

Dow Jones Industrial Average futures were down 133 points, or 0.4%. S&P 500 and Nasdaq 100 futures were down 0.3% and 0.4%, respectively.

An announcement late Monday from Walmart, which cut its quarterly and full-year earnings estimates due to rising food inflation, alarmed investors who traded the implications for other retail stocks. The high-volume retailer said higher prices spur consumers to back away from public spending on merchandise, especially in apparel.

Walmart is down nearly 9% in extended trade, dragging other retailers with it. The target is down 5% and Amazon stock is down 4%. Macy’s and Dollar General both fell 3%, while Costco was down 2%.

“Obviously they have the wrong stuff, and they have to sell it more aggressively to make that clear, which looks like they’re going to take a pretty big hit as a result,” Jeremy Bryan, senior portfolio manager at Gradient Investments, said during CNBC’s “Closing Bell: Overtime” .

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

Stocks during Monday’s session traded in a narrow range, with the S&P 500 adding 0.1%. The Dow Jones Industrial Average jumped 90.75 points, or 0.3%. The high-tech Nasdaq Composite was late, down 0.4%. All major averages are on track to achieve their best month of the year.

Traders are bracing for an onslaught of huge tech earnings and economic data this week, as well as the results of the Federal Reserve’s meeting, which will help Wall Street guide its outlook for the rest of the year.

“I think there’s going to be a divided market,” VantageRock’s Avery Sheffield said during CNBC’s “Closing Bell: Overtime.” “I think the bottom could be in some stocks, but not elsewhere. So this could actually be one of the most dynamic 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 rise of three-quarters of a percentage point.

Coca-Cola, McDonald’s and General Motors are scheduled 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 are anticipating the latest reading of the Case-Shiller Home Price Index at 9 AM ET. Consumer confidence and new home sales data are due at 10 AM ET.

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