What happened

Shares of Target (TGT 0.59%) were pulling back today on a weak November retail sales report and as the Federal Reserve, Bank of England, and European Central Bank all raised interest rates, increasing the chances that the global economy will enter a recession.

Though there was no company-specific news out on Target, shares of the retailer reacted to the sell-off in the broad market, in particular the disappointing retail numbers.

As of 3:20 p.m. EST, the stock was down 3.6% compared to a 2.5% decline in the S&P 500.

The entrance to a Target store.

Image source: Target.

So what

This morning, the Census Bureau reported retail sales fell 0.6% from October to November, which was worse than expectations of a decline of 0.1%. Year over year, retail sales across all categories were up 6.5%.

Target has warned several times this year of weak demand, cutting guidance along the way, and the November numbers didn't inspire confidence going into the holiday season. Sales in discretionary categories that Target depends on were particularly weak.

Sales at electronics and appliance stores were down 1.5%; furniture and home furnishings declined 2.6%; and clothing fell 0.2%. Though Target also sells consumer staples products like groceries and personal care and household items, discretionary goods tend to offer higher margins, so they're more important to its bottom line.

If there's a silver lining here, it's that October retail sales had jumped 1.3% month over month, so the decline in November may partly be a snapback as Americans got an early start to their holiday shopping to take advantage of inventory clearances.

Now what

In its third-quarter earnings report a month ago, Target called out softening-demand trends persisting into November, so the numbers aren't a total surprise.

Due to those headwinds, the company expects a low single-digit decline in comparable sales in Q4. With interest rates still rising, Target's challenges could continue for a few more quarters before the company bounces back.