Stocks Slide 0.5% as Walmart Miss Rattles Retail, Yields Rebound

The S&P 500 fell 0.5% on Thursday after Walmart's slowest U.S. sales growth in six years dragged retail peers lower and revived consumer-spending concerns.

"The buyback is a drop in the bucket relative to a USD 30tn marketable Treasury market, so it is unlikely to be a major market driver," said Rajat Bhattacharya, senior investment strategist at Standard Chartered.

Walmart dropped 8.9% to $104.10, erasing roughly $50 billion in market value, after U.S. comparable sales rose 2.6% versus the 3.7% consensus. Kohl's, Costco, Dollar Tree, BJ's Wholesale and Dick's Sporting Goods all declined, while Advance Auto Parts plunged after citing "constrained" household budgets. Treasury yields climbed back, with the 10-year at 4.75% and the 30-year at 5.25%, after the Philly Fed Manufacturing Index jumped to 47.4 from 41.4, the highest since April 2021.

Consumer spending drives about two-thirds of U.S. economic output, making Walmart's read on the American wallet a bellwether for the broader economy. With Fed Chair Warsh's Jackson Hole speech next week and the September meeting looming, the retail data will shape whether the central bank holds rates steady.

Walmart's headline numbers beat. Revenue reached $187.9 billion and adjusted earnings hit $0.81 per share, topping the $0.74 consensus. But the figure tied directly to consumer demand disappointed: customer visits rose 1.5% while spending per trip grew just 1.1%, and the company guided third-quarter earnings to $0.62-$0.64 per share, below the $0.69 consensus. Management said the cautious outlook reflects reinvesting tariff refunds into customer rollbacks, a move that added 96 basis points to gross margin in the quarter.

The retail weakness rippled through the sector. Sam's Club, Walmart's membership warehouse chain, posted 4.4% comparable growth, but the broader read was downbeat. Deere rose after topping fiscal third-quarter forecasts, with strength in construction equipment offsetting the farm slump, while Alibaba fell as investors weighed higher AI spending against accelerating cloud growth.

The bond market's reaction to the Treasury's buyback announcement faded quickly. Treasury Secretary Scott Bessent said the government may increase buybacks of 30-year Treasuries beyond the $4 billion per issue announced Wednesday, telling CNBC the move reflects his view "that we believe that the yields don't reflect the underlying fundamentals." But yields rose Thursday as the Philly Fed's strong reading reinforced the case for the Fed to hold rates.

The dollar weakened, with the DXY index falling 0.8% to a three-month low and breaking below its 200-day moving average, helping gold test its 200-day average around $4,517 an ounce. Oil climbed as the United Arab Emirates suspended economic ties with Iran under U.S. pressure, adding to the inflation backdrop.

The selloff coincided with three drivers: Walmart's sales miss, the Philly Fed's jump to a four-year high, and rising oil prices. Initial jobless claims came in at 206,000, matching consensus, indicating the labor market is holding up even as the consumer shows strain.

This article is for informational purposes only and does not constitute investment advice.