Stocks fell as bad economic data and a weaker outlook from the world's largest retailer highlighted the effects of rising pressures on consumer spending, with recession fears rife as the Federal Reserve prepares to deliver another jumbo-sized boost.

Walmart's rout engulfed industry peers, with Morgan Stanley stating that its prediction is a "possible danger signal" for Amazon's retail margins. In late trading, a $166 billion exchange-traded fund tracking the NASDAQ 100 soared as Google's parent company, Alphabet surged after earnings. Microsoft slumped after reporting its worst sales growth since 2020.
- Traders were also bracing for another 75-basis-point boost by fed officials on Wednesday, with a combined increase of 150 basis points in June and July being the highest rate rise since the early 1980s, when then-chairman Volcker was battling sky-high inflation. Consumer confidence in the United States has dropped to its lowest level since February 2021, while a measure of new home sales has dropped for the fifth time this year.

According to Goldman Sachs strategists, US policymakers are expected to remain hawkish for longer due to persistently rising inflation, the latest to enter the debate over a potential central bank pivot as the economy slows. They agreed with Morgan Stanley's Michael Wilson, who said on Monday that it's too early to anticipate the Fed to stop raising.

Meanwhile, strategists at JPMorgan believe that bets that prices have peaked will result in a Fed turnaround and strengthen the picture for equities in the second half.