Good Evening. As investors braced themselves for the Federal Reserve to announce another significant rate hike in their fight against persistent inflation, U.S. markets plunged on Tuesday.
While the Dow Jones Industrial Average lost 1.01%, the S&P 500 fell 1.13%. The Nasdaq Composite took the lowest blow by 0.95%.
SLASHING JOBS
In an effort to cut costs amid stagnant sales, Gap (GPS) is eliminating 500 corporate jobs in San Francisco and New York.
The San Francisco-based business, which has stores under its own name as well as Old Navy, Banana Republic, and Athleta, has struggled for years. However, the epidemic and rising supply chain expenses have placed an even greater financial burden on the company. Additionally, the agreement between Gap and Kanye West to market the rapper’s apparel line under the Yeezy brand was terminated last week.
On top of that, Gap Inc.’s interim CEO Bob Martin said the business intends to lower operating expenses to boost profitability.
It is not the only company that is doing it. A number of other businesses, like Walmart, Best Buy, and Peloton, have reduced their workforces. Bed Bath & Beyond announced earlier this month that it will liquidate around 150 of its namesake locations and reduce its workforce by 20%.
A LITTLE TOO MUCH
The home-flipping website Opendoor lost money on 42% of resales in August, according to Bloomberg.
When it went public in 2020, the firm that pioneered iBuying—a method of automating real estate purchases—was lauded as the “Amazon of homes.” Its tactic is to use an algorithm to make quick offers on houses, make some minor repairs, and then quickly resell the houses—sometimes in as little as a few months.
But by June, the sky-high home values that had peaked during the COVID boom had begun to go south, and the Fed’s summer interest rate hikes did not help. As a result, the company had a ton of goods that nobody wanted to buy despite having paid a lot of money for them.
Big picture: While some analysts claim that Opendoor’s worst days are behind it, other data points, such as the ninth consecutive month of declining homebuilder sentiment in September, suggest that the housing market party may have finally reached its after-hours.