To The Moon

U.S. stocks plunged Tuesday as the prospect of higher-for-longer interest rates and letdowns from big-box retailers dampened the mood on Wall Street to start a busy holiday-shortened week.

The U.S. stock and bond markets were closed on Monday for Presidents Day.

The S&P 500 (^GSPC) nosedived 2%, falling below the key 4,000 level, while the Dow Jones Industrial Average (^DJI) shed nearly 700 points, or 2.1%. The technology-heavy Nasdaq Composite (^IXIC) tanked 2.5%.

Investors evaluated quarterly financials from Walmart (WMT) and the Home Depot (HD) for updates on the health of the U.S. consumer, which has so far remained resilient in the face of stubbornly high inflation — most recently evidenced by January's stunning retail sales data out last week.

Walmart, however, warned Tuesday morning that it was cautious about the outlook for the economy and said customers pressured by inflation shopping for lower-priced items may negatively impact margins. The retail giant also issued full-year earnings guidance below Wall Street estimates. Shares closed slightly higher after paring losses from early in the session.

"The consumer is still very pressured, and if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods," Walmart chief financial officer John David Rainey said during an earnings call. "And so that’s why we take a pretty cautious outlook on the rest of the year."

Traders will be interested in hearing from one of this year’s top performers in the S&P 500: Nvidia Corp. The company is set to report fourth-quarter results Wednesday at a tumultuous time for the chipmaker. Though the personal-computer industry continues to struggle, the firm’s prospects in data centers and artificial intelligence have bolstered the shares in 2023. In the run-up to its report, the shares extended a four-day rout to 10%.

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