Wall Street opened lower on Wednesday as disappointing earnings from major retailer target and renewed concerns over Japan’s sovereign debt weighed heavily on investor sentiment. The Dow Jones Industrial Average dropped 361.20 points, or 0.85%, to 42,316 in early morning trading. The S&P 500 fell 28.50 points, or 0.48%, to 5,911.96, while the Nasdaq Composite declined 65.56 points, or 0.34%, to 19,077.20.

The Russell 2000, a benchmark for small-cap stocks, also came under pressure, shedding 1.85 points, or 0.88%, to trade at 207.24.

One of the primary drags on the major indexes was Target Corp., which tumbled over 6% in premarket trading after releasing a dismal fiscal first-quarter earnings report. The retailer reported adjusted earnings per share of $1.30, missing analyst expectations of $1.61. Net sales of $23.85 billion also fell short of forecasts and were down 2.8% year-over-year.

Comparable sales slid 3.8%, with a particularly sharp 5.7% drop in in-store transactions. CEO Brian Cornell attributed the weak performance to “ongoing discretionary spending weakness, tariff uncertainty, and public backlash” related to the company’s diversity, equity, and inclusion initiatives.

“Of the 35 merchandise categories Target tracks, it gained or held share in only 15,” the company reported, reflecting a broader erosion in competitiveness. Target also slashed its full-year guidance, now expecting adjusted EPS in the range of $7.00 to $9.00, well below the prior forecast and market consensus of $8.59.

Although digital sales provided some support—most notably a 36% increase in same-day deliveries through Target Circle 360—investors appeared unconvinced that these strengths could offset broader consumer pullbacks and margin pressures. Gross margins narrowed to 28.2%, weighed down by markdowns and elevated digital fulfillment costs, despite improvements in inventory shrink.

Beyond corporate earnings, global bond market developments also sent tremors through equity markets. Japan’s government bond yields soared after a lackluster 20-year bond auction on Tuesday, sparking renewed concerns over debt sustainability in the world’s third-largest economy. The average yield on the auctioned bonds surged to 2.555%, the highest level since 2000, as investor appetite waned. Longer-dated Japanese government bonds fared worse, with 30-year yields hitting 3.15% and 40-year yields climbing to a record 3.61%.

The Bank of Japan, which owns over half of all outstanding Japanese government bonds, is in the midst of unwinding its long-standing quantitative easing program. The bond auction’s weak results—widely seen as a reflection of market fragility—have raised questions about the central bank’s ability to reduce its footprint without destabilizing markets.

Prime Minister Shigeru Ishiba’s stark warning that Japan’s fiscal outlook is “worse than Greece” further unnerved investors, exacerbating fears of a broader global bond market contagion.

With Japan being the largest foreign holder of U.S. Treasuries, the implications are not lost on American markets. A shift in Japanese demand away from U.S. debt could put upward pressure on Treasury yields, compounding financing concerns already heightened by a recent U.S. debt downgrade by Moody’s to Aa1. As of this week, U.S. 30-year yields had touched 5.037%, in step with rising global rates.

Analysts say the bond market dynamics in Japan offer a cautionary tale for U.S. policymakers. “Countries with excessive debt and no plans to control it are being watched more closely by the global bond police,” Peter Boockvar, chief investment officer at Bleakley Financial Group, told the Journal.

As the trading day unfolds, investors will be watching for further earnings reports and developments in global monetary policy. For now, the mood on Wall Street remains cautious, with early losses in all major indices signaling a defensive tone driven by a mix of corporate and sovereign financial anxieties.