Stocks fall with major indexes down, traders await key US inflation data
Stocks fell on Thursday as Salesforce experienced its worst day in about two decades.
Traders are also anticipating the release of key US inflation data, as reported by CNBC.
The Dow Jones Industrial Average dropped 330.06 points, or 0.86 percent, to 38,111.48. The S&P 500 decreased 0.6 percent to 5,235.48, and the Nasdaq Composite declined 1.08 percent to 16,737.08, highlighting the weakness in technology stocks.
Salesforce's shares plunged 19.7 percent after the company missed revenue expectations for the fiscal first quarter and issued a weak outlook. This marked Salesforce's worst session since 2004.
Nvidia fell over 3 percent, recording its first negative session following strong earnings report last week. Microsoft also declined more than 3 percent, marking its worst day since October.
These declines weighed heavily on the major indexes due to the companies' significant market presence, overshadowing gains in other areas. Despite the overall drop in the S&P 500, more than 360 of its stocks posted gains. Meanwhile, the Russell 2000, which focuses on small-cap stocks, rose 1 percent.
Thursday’s market movements occurred during a challenging, holiday-shortened trading week. The S&P 500 has decreased by about 1.3 percent, and the Nasdaq Composite has fallen 1.1 percent, putting both on track to end five-week winning streaks.
The Dow has dropped more than 2 percent, set for its second consecutive losing week.
“At this point, we’re in a one step forward, one step back mentality,” said Jason Heller, executive vice president at Coastal Wealth. Following recent all-time highs, traders are “taking some risk off the table.”
An increase in the 10-year Treasury yield has negatively affected investor sentiment this week. Higher yields can deter stock investments by reducing the multiples traders are willing to pay for equities and making safer investments, like Treasury bills and money market funds, more attractive.
Although the yield slipped below 4.6 percent on Thursday, it stayed above the 4.5 percent level, which is challenging for stocks.
Despite a turbulent week, the indexes are all poised to end the month higher. The Nasdaq Composite and S&P 500 have risen nearly 7 percent and 4 percent, respectively, in May. The Dow has increased 0.8 percent for the month. All three indexes achieved record highs in May.
Investors should expect continued market volatility as questions arise about consumer spending and the direction of interest rates, said Clark Bellin, chief investment officer at Bellwether Wealth. He compared recent market behaviour to a wave coming in before receding.
“We still have some good excitement built up in the market — much of this is momentum investing,” Bellin said. “But momentum investing works until it doesn’t.”
Traders are looking ahead to Friday’s release of the personal consumption expenditures price index report for April, the Federal Reserve’s preferred inflation gauge. Inflation is expected to be 2.7 percent for April, according to Dow Jones estimates, still above the central bank’s 2 percent target.
