NEW YORK: US stock indexes fell on Thursday, with a plummeting Salesforce weighing on the Dow, while data showing the economy had grown slower than previously expected in the first quarter supported bets of rate cuts from the Federal Reserve this year.
The blue-chip Dow hit a four-week low after Salesforce plunged 20%. The firm forecast second-quarter profit and revenue below Street estimates due to weak client spending on its cloud and enterprise business products.
The broader S&P 500 technology sector also dropped 1.6%. A Commerce Department report showed the economy grew slower in the first quarter than previously estimated, after downward revisions to consumer and equipment spending and a key measure of inflation ticked lower, ahead of Friday’s personal consumption expenditure report for April. Another set of numbers showed weekly jobless claims rose more than expected.
“Investors are shying away from the perceived bulletproof areas of the markets, which have been information technology and services, because you’ve seen economic surprises move to the downside,” said Jeff Schulze, head of economic and market strategy at ClearBridge Investments.
Areas that would do better in an environment conducive to the Fed embarking on a cutting cycle in the latter half of this year are seeing some attention, he said.
US Treasury yields dipped following the report, while chances for an at least 25-basis-point interest rate reduction in September edged up to 52%, from 48.7% before the data, according to the CME Group’s FedWatch Tool.
Eight of the 11 S&P 500 sectors edged higher, with rate-sensitive real-estate stocks adding over 1%. The small-cap Russell 2000 index also recovered 1.1% from Wednesday’s drop.
Uncertainty over monetary policy, combined with heavy new Treasury issuance, had pushed bond yields to multi-week highs earlier in the week, pressuring riskier assets.
The benchmark S&P 500 Index is trading at its lowest level in two weeks, while the tech-focused Nasdaq dropped to its lowest in nearly a week. New York Fed President John Williams said the current setting of monetary policy was in the right place to help inflation get back to 2%, adding that he doesn’t feel an urgency to act on monetary policy. At 12:04 p.m. the Dow Jones Industrial Average fell 334.33 points, or 0.87%, to 38,107.21, the S&P 500 lost 17.03 points, or 0.32%, to 5,249.92 and the Nasdaq Composite lost 85.53 points, or 0.51%, to 16,835.05. Among others, Tesla gained 0.6% after Reuters reported the company was preparing to register its ‘Full Self-Driving’ software in China.
Retailer American Eagle Outfitters dropped 3.7%, posting downbeat quarterly revenue as sticky inflation hurt demand for its apparel and accessories.
Department-store chain Kohl’s slumped 24% after cutting its annual sales and profit forecasts. Best Buy jumped 11.3% after beating forecasts for quarterly profit and predicting higher laptop sales, while HP gained 17.4% after it posted better-than-expected second-quarter revenue. Advancing issues outnumbered decliners by a 2.96-to-1 ratio on the NYSE and by a 1.87-to-1 ratio on the Nasdaq.
The S&P 500 posted 11 new 52-week highs and nine new lows, while the Nasdaq Composite recorded 38 new highs and 68 new lows.