Mid-week, investors wiped nearly 25% off Target shares after its profit halved. Meanwhile, Walmart was down 1.3% on Thursday after already falling more than 17% in the two sessions after it announced poor results on Tuesday. 

Target’s earnings revealed consumers have been spending more on food and household essentials but cutting back on high-margin items. Meanwhile, Walmart’s earnings revealed consumers had moved to buy lower-margin basics. 

On Tuesday, Federal Reserve Chair Jerome Powell pledged the US central bank would rise interest rates as high as necessary to combat spiralling inflation.

"We think the developing impact on retail spending as inflation outpaces wages for even longer than people might have expected is a principal factor in causing the market sell-off today," commented Paul Christopher, head of global market strategy at Wells Fargo Investment Institute. "Retailers are starting to reveal the impact of eroding consumer purchasing power."