All of Wall Street’s major indices suffered heavy falls yesterday. For the S&P 500 and Dow Jones it was their biggest single-day drops since 2020 and the tech-heavy Nasdaq fell by 4.7%. Online retail specialist Amazon helped drag the tech-heavy index down with a 7.2% decline in market cap as the S&P 500 fell by 4% and the Dow Jones by 3.6%. The Nasdaq 100, which contains many of the world’s largest tech companies fell 5%.

A day after Walmart, the word’s biggest retailer by sales, cut its profit forecast citing inflationary pressures, Target, another large American retailer, saw its valuation plunge by 25%. The $53.67 decline in Target’s share price to $161.61 came after the company warned shareholders it also expected to see margins hit by higher wage and fuel costs this year.

While Home Depot bucked the trend on Tuesday when its chief executive Craig Menear told investors its customers looked “resilient” to inflation for now, analysts are concerned Walmart and Target cutting their profit outlooks could set a precedent for other retailers. Home Depot’s status as a retail outlier could be because more Americans are resorting to DIY to save on hiring professionals for home repairs and improvements.

There were losses across each and every of the S&P 500’s sector indices with consumer discretionary and consumer staples responding to the tough retail environment with 6.8% and 6% falls respectively.

A Wells Fargo Investment report published yesterday forecast the U.S. to fall into a mild recession towards the end of this year, persisting into early 2023. The UK and eurozone are also expected to dip into recession over the months ahead.

On Tuesday, Fed chairman Jerome Powell was hawkish on interest rates, vowing to increase them to as high as necessary to bring inflation under control. It has reached 8.3% while in the UK inflation rose above 9% in April. Traders have already priced in expectations for 0.5% interest rate hikes in both June and July.

In the UK, the FTSE 100 has opened to losses of almost 2%, with negatively spilling over from Wall Street trading yesterday. Other major benchmark indices across Europe, including Germany’s DAX 40 and France’s CAC have had similar drops this morning. Asian indices were also down earlier today with Australia’s S&P/ASX 200 sliding 1.65% and the Hang Seng down over 2.5%.