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* Target's margin cut hits retail stocks
* Kohl's climbs on exclusive sale talks with Franchise Group
* Futures down: Dow 0.73%, S&P 0.87%, Nasdaq 1.16%
June 7 (Reuters) - U.S. stock indexes were set for a lower open on Tuesday, after Target Corp's quarterly margin forecast cut raised worries about slowing demand in an inflationary environment and dragged down retail shares.
Shares of Target slid 7.6% in premarket trading as the big-box retailer said it would have to offer deeper discounts and cut back on stocking higher-margin discretionary items.
Shares of rival Walmart Inc fell 3%, while others including Nordstrom Inc, Macy's Inc, Dollar General, Costco and Best Buy Co Inc, dropped between 1.5% and 3.5%.
"When you get inflation elevated and demand cooling off, you do get margin pressure. This was already the case in first-quarter numbers and now we get more indications that it's continued pressure, not just a one-off quarter thing," said Andrea Cicione, head of strategy at TS Lombard.
"It's not doom and gloom, but we think that the downside risk to growth is growing. This is still a market where you want to fade the rallies as opposed to buying the dip."
Megacap growth stocks also retreated, pressured by U.S. Treasury yields, which hovered near 3-1/2-week highs hit in previous session ahead of inflation data on Friday. Tesla Inc and Amazon.com fell 2.6% each.
A hot reading on the consumer price index could bolster expectations that the Fed will continue to aggressively hike rates in the second half of the year, at a time when labor market is buoyant and consumers spending remain resilient.
Money markets are expecting 50-basis points rate increases next week, followed by July and possibly in September.
Global shares also fell as a surprise 50-basis-point rate increase in Australia raised concern over policy tightening, while oil prices hovered just below $120 a barrel.
At 8:20 a.m. ET, Dow e-minis were down 239 points, or 0.73%, S&P 500 e-minis were down 36 points, or 0.87%, and Nasdaq 100 e-minis were down 146 points, or 1.16%.
Apple Inc dipped 1.5% after EU countries and lawmakers agreed to a single mobile charging port for mobile phones, tablets and cameras in a world first.
Block Inc and Affirm Holdings Inc shed 2.9% and 3.9%, respectively, after Apple launched buy now, pay later service, called Apple Pay Later.
Kohl's Corp jumped 11% as the department store chain entered exclusive talks with retail store operator Franchise Group Inc over a potential sale that would value it at nearly $8 billion.
The CBOE volatility index, Wall Street's fear gauge, rose for a third straight day and was last up at 26.08 points. (Reporting by Devik Jain in Bengaluru; Editing by Arun Koyyur and Anil D'Silva)
