The CBOE Volatility Index and VIX-related exchange traded funds surged Wednesday as U.S. equities reeled in their worst day since 2020 following disappointing earnings results that added to recession fears.

The iPath Series B S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) increased 5.2% and the ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY) advanced 14.7% on Wednesday. Meanwhile, the CBOE Volatility Index jumped 18.6% to around 31.0.

Dragging on the S&P 500, Target Corp. (NYSE: TGT) lost about a quarter of its stock market value on Wednesday after warning of a large margin hit from rising fuel and freight costs.

“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,” Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, told Reuters. “Retailers are starting to reveal the impact of eroding consumer purchasing power.”

With American consumers facing higher costs at the stores, many anticipate a weakening earnings cycle for Corporate America ahead.

“Inflation is hitting every aspect of an earnings report, whether it be the transportation side or supply-chain disruption,” Nick Giacoumakis, president and founder of NEIRG Wealth Management, told the Wall Street Journal. “Customers are no longer buying the more expensive items they would typically buy. All this trickles through to an earnings report.”

Inflation concerns also further exacerbated the selling, with interest rate-sensitive mega-cap growth stocks taking the brunt of the hit.

“The cons outweigh the pros for growth stocks at this particular moment, and the market is trying to decide how bad it’s going to get,” Liz Young, head of investment strategy at SoFi, told Reuters. “The market is fearful of the next six months. We may find out that it doesn’t need to be as fearful as this, and markets do tend to overreact on the downside.”

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