What happened
Shares of Amazon.com (AMZN +1.04%) continued to fall on Monday as fears of a consumer retreat grew. The e-commerce giant's stock was down 3.2% at 12:03 p.m. ET, and was down 10% overall for the month to date.
The Federal Reserve hiked interest its benchmark interest rate by 0.5 percentage points last week, and it's expected to do so again following its next two monthly meetings in June and July as it attempts to tame inflation.
Image source: Amazon.com.
So what
Rampant inflation is battering consumers, and when coupled with the prospects for economic decline, sales growth is likely going to slow further. But getting inflation under control won't be easy or pleasant and many pundits fear it could cause the economy to contract.
U.S. gross domestic product was already down 1.4% in the first quarter. The Federal Open Market Committee has said that it plans to boost the federal funds rate to around 1.9% by the end of 2022. But St. Louis Fed President James Bullard has said publicly that he thinks a steeper path of hikes to 3.5% by the end of the year will be needed to get inflation under control.
Now what
As the biggest e-commerce site in the U.S., accounting for 40% of all online sales, Amazon is always apt to feel some pain when consumers tighten their belts. Yet it is still growing: U.S. revenue was up 7.5% in the first quarter.
While retail obviously remains important to the company, Amazon's cloud computing operations are its biggest profit center. Earnings were up 57% in that segment last quarter. Look for that trend to continue as more businesses move more of their own operations online.
