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Today in the Market (6/7/2022)

Good Evening. After investors shrugged over a profit warning from Target that impacted on broader markets earlier in the day, U.S. equities surged higher to end a tumultuous session higher Tuesday.

The S&P 500 increased by 0.95%, while the Dow Jones increased by 0.80%. The Nasdaq rose 0.94%.

RETAIL

Target (TGT) is preparing to batten down the hatches on its company as consumers become more cautious in their spending owing to rising food, gas, and shelter prices.

The discount retailer, whose stock has dropped 25% in recent weeks as a result of a surprise earnings shortfall due to a downturn in consumer spending that it plans to reduce inventory by offering discounts, canceling orders, and scrutinizing expenses. Target started the second quarter with inventory up 43%, which the firm admitted was too high in comparison to consumer demand when it reported first-quarter profits a few weeks ago.

Target’s actions are meant to “right-size its inventory for the balance of the year and create additional flexibility to focus on serving guests in a rapidly changing environment,” the company stated.

What could happen? As sector discounting goes up, inflation remains high, and customers retrench, Target’s warning might lead to further earnings estimate cutbacks for retailers. Since a disappointing retail reporting season in mid-May, the entire industry has been under pressure, and the news out of Target implies we’re in the early stages of a severe consumer spending downturn that retailers weren’t expecting.

BUYERS REMORSE...? MAYBE

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Elon Musk has escalated his threats to abandon his Twitter takeover by bringing in his legal team.

Musk’s lawyer filed a letter to Twitter accusing the business of ignoring Musk’s requests for additional information about the number of bogus and spam accounts on the network, in his most substantial move yet to drop out of the contract. Musk has claimed that Twitter has a much worse bot problem than it admits, and is using this as rationale to cancel (or maybe renegotiate) his $44 billion acquisition.

Big picture: Musk’s obsession with bots could be due to the fact that he encounters them significantly more frequently than the typical Twitter user—or even the average celebrity. According to software company SparkToro, almost 70% of Musk’s Twitter followers are spam, false, or inactive, compared to 41% for accounts with comparably large followings.

In response to Musk’s message, Twitter issued a comment that said, “No take-backs, you signed on the dotted line, and we’re set on making this happen.” If Twitter grows tired of Musk’s dithering, it may file a lawsuit to compel Musk to complete the acquisition.

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