Walmart and Target reported better than expected sales. But earnings disappointed primarily because inflation pressures are shrinking margins. Both companies said they expect price pressures to persist for several quarters.
The problem investors face is the rising possibility that inflation remains higher for longer. This will have a negative impact on profits and may cause consumers to pull back from currently high levels of consumption. Additionally, the Federal Reserve will have to remain hawkish on interest rates for longer which increases the probability of recession.
